PAY SATISFACTION, JOB SATISFACTION, ORGANIZATIONAL COMMITMENT, AND

TURNOVER INTENTION IN TAIWAN BANKING: STRUCTURAL EQUATION MODELING

Introduction to the Problem

High turnover rate

Cost

Knowledge

Customers

Taiwanese banking industry

Gaps

Conflicts between different theories and empirical studies

Different countries & cultures

21st century

Purpose of the Study

To explore the relationship and degrees among those factorsPay satisfaction’s roleTo discover the accurate ratio between pay raise and turnover intentionThe conflicts between different theories and results of empirical studies

Definition of TermsPay Satisfaction

Job Satisfaction Promotion Supervision Fringe Benefits Contingent Rewards Operating Procedures Coworkers Nature of Work Communication

Definition of Terms (cont.)

Organizational Commitment Affective Commitment Continuance Commitment Normative Commitment

Turnover Intention

Domestic Private Bank

Entry-Level Employee

Mid-Management

Literature ReviewLiterature Review

Theoretical Framework & Theoretical Framework & 2 Research Questions2 Research Questions

Hypothesized Models & Hypothesized Models & 24 Hypotheses 24 Hypotheses

Theoretical FrameworkTheoretical Framework

Turnover theory (Steers & Mowday, 19Turnover theory (Steers & Mowday, 1981)81)

Model of Pay SatisfactionModel of Pay Satisfaction (Lum, Kervi (Lum, Kervin, Clark, Reid, and Sirola, 1998)n, Clark, Reid, and Sirola, 1998)

JJob satisfaction theoryob satisfaction theory (Spector, 1997) (Spector, 1997) The three-component model of organiThe three-component model of organi

zational commitment (Allen & Meyer, 1zational commitment (Allen & Meyer, 1991) 991)

Theoretical Framework

Pay Satisfaction

Job Satisfaction

Organizational Commitment

TurnoverIntention

Promotion

Communication

Supervision

Nature of work

Coworkers

Operating Procedures

Fringe Benefits

Contingent RewardsAffective commitment

Continuance commitment

Normative commitment

Research QuestionsResearch Questions1.1. What are the socio-demographic What are the socio-demographic

characteristics of a sample of employees characteristics of a sample of employees in the Taiwanese banking industry?in the Taiwanese banking industry?

2.2. What are the degrees of pay satisfaction, What are the degrees of pay satisfaction, job satisfaction, organizational job satisfaction, organizational commitment, and turnover intention of a commitment, and turnover intention of a sample of employees in the Taiwanese sample of employees in the Taiwanese banking industry?banking industry?

Hypothesized ModelsHypothesized Models

Pay satisfaction, job satisfaction, Pay satisfaction, job satisfaction, organizational commitment, and organizational commitment, and turnover intention modelturnover intention model

Pay satisfaction’s sub-variables and Pay satisfaction’s sub-variables and turnover intention modelturnover intention model

Organizational commitment’s sub-Organizational commitment’s sub-variables and turnover intention variables and turnover intention modelmodel

Pay

S

atis

fact

ion

Em

ploy

ee

Tur

nove

r

Job

Sat

isfa

ctio

n

Org

aniz

atio

nal C

omm

itm

ent

H 2

H 3

Sup

ervi

sion

Com

mun

icat

ion

Nat

ure

of

wor

kC

owor

kers

Ope

rati

ng

Pro

cedu

res

H2a

H2b

H2c

H2d

H2e

H2f

H2g

H2h

Aff

ecti

ve

com

mit

men

tC

onti

nuan

ce

com

mit

men

tN

orm

ativ

e co

mm

itm

ent

H3b

H3c

Fri

nge

Ben

efit

s

Con

ting

ent

Rew

ards

Pro

mot

ion

Hypothesized pay satisfaction, job satisfaction, organizational commitment, and turnover model

H3a

H6, H6a, H6b

H5, H5a, H5b H4, H4a, H4b

H1, H1a

Pay Satisfaction

Turnover Intention

Job Satisfaction

Organizational Commitment

H1, H1a

H2H3

H4, H4a, H4bH5, H5a, H5b

H6, H6a, H6b

Hypothesized pay satisfaction, job satisfaction, organizational commitment, and turnover intention model

HypothesesHypotheses H1: Pay satisfaction has a negative H1: Pay satisfaction has a negative

relationship with employee turnover.relationship with employee turnover. H1a: The amount of extra money given H1a: The amount of extra money given

to employees can change specific to employees can change specific levels of employees’ turnover levels of employees’ turnover intention.intention.

H2: Job satisfaction has a negative H2: Job satisfaction has a negative relationship with employee turnover.relationship with employee turnover.

Hypotheses (cont.)Hypotheses (cont.) H3: Organizational commitment has a H3: Organizational commitment has a

negative relationship with employee negative relationship with employee turnover.turnover.

H4: Pay satisfaction has a positive H4: Pay satisfaction has a positive relationship with job satisfaction.relationship with job satisfaction.

H4a: Pay satisfaction is a mediator H4a: Pay satisfaction is a mediator between job satisfaction and between job satisfaction and employee turnover.employee turnover.

Hypotheses (cont.)Hypotheses (cont.) H4b: Job satisfaction is a mediator H4b: Job satisfaction is a mediator

between pay satisfaction and between pay satisfaction and employee turnover.employee turnover.

H5: Pay satisfaction has a positive H5: Pay satisfaction has a positive relationship with organizational relationship with organizational commitment.commitment.

H5a: Pay satisfaction is a mediator H5a: Pay satisfaction is a mediator between organizational commitment between organizational commitment and employee turnover.and employee turnover.

Hypotheses (cont.)Hypotheses (cont.)

H5b: Organizational commitment is a H5b: Organizational commitment is a mediator between pay satisfaction and mediator between pay satisfaction and employee turnover.employee turnover.

H6: Job satisfaction has a positive H6: Job satisfaction has a positive relationship with organizational relationship with organizational commitment. commitment.

H6a: Job satisfaction is a mediator H6a: Job satisfaction is a mediator between organizational commitment between organizational commitment and employee turnover.and employee turnover.

Hypotheses (cont.)Hypotheses (cont.)

H6b: Organizational commitment is a H6b: Organizational commitment is a mediator between job satisfaction and mediator between job satisfaction and employee turnover.employee turnover.

Fringe Benefits

Turnover Intention

Contingent Rewards

H2b

H2c

H2d

Coworkers

Nature of work

Communication

Supervision

Promotion

H2a

H2e

H2f

H2g

H2h

Operating Procedures

Hypothesized pay satisfaction’s sub-variables and turnover intention model

Hypotheses (cont.)Hypotheses (cont.) H2a: Promotion has a significant H2a: Promotion has a significant

relationship with employee turnover.relationship with employee turnover. H2b: Supervision has a significant H2b: Supervision has a significant

relationship with employee turnover.relationship with employee turnover. H2c: Fringe benefits have a significant H2c: Fringe benefits have a significant

relationship with employee turnover.relationship with employee turnover. H2d: Contingent rewards have a H2d: Contingent rewards have a

significant relationship with employee significant relationship with employee turnover.turnover.

Hypotheses (cont.)Hypotheses (cont.) H2e: Operating procedures have a H2e: Operating procedures have a

significant relationship with employee significant relationship with employee turnover.turnover.

H2f: Coworkers have a significant H2f: Coworkers have a significant relationship with employee turnover.relationship with employee turnover.

H2g: The nature of work has a significant H2g: The nature of work has a significant relationship with employee turnover.relationship with employee turnover.

H2h: Communication has a significant H2h: Communication has a significant relationship with employee turnover.relationship with employee turnover.

Continuance Commitmen

t

Turnover Intention

Normative Commitmen

t

Affective Commitmen

t

H3aH3b

H3c

Normative Commitmen

t

Hypothesized organizational commitment’s sub-variables and turnover intention model

Hypotheses (cont.)Hypotheses (cont.) H3a: Affective commitment has a H3a: Affective commitment has a

significant relationship with employee significant relationship with employee turnover.turnover.

H3b: Continuance commitment has a H3b: Continuance commitment has a significant relationship with employee significant relationship with employee turnover.turnover.

H3c: Normative commitment has a H3c: Normative commitment has a significant relationship with employee significant relationship with employee turnover.turnover.

MethodologyMethodologyResearch DesignResearch Design

Quantitative, Non-experimentQuantitative, Non-experimental studyal study

ExplanatoryExplanatory and Correlational and Correlational surveysurvey

MethodologyMethodologySampling PlanSampling Plan

Target Population (78,336)Target Population (78,336) Accessible Population Accessible Population

(46,157)(46,157) Probability and Two-stage Probability and Two-stage

Total Accessible Sampling Total Accessible Sampling PlanPlan

Questionnaire: 68 questions Questionnaire: 68 questions in 5 sections in 5 sections

MethodologyMethodologyInstrumentationInstrumentation

Pay SatisfactionPay Satisfaction Pay satisfaction measured by Pay satisfaction measured by

modified “pay” sub-dimensiomodified “pay” sub-dimension of Job Satisfaction Scale (Sn of Job Satisfaction Scale (Spector, 1985)pector, 1985)

4 items4 items

MethodologyMethodologyInstrumentation (cont.)Instrumentation (cont.)

Job SatisfactionJob Satisfaction Job satisfaction measured by Job satisfaction measured by

modified Job Satisfaction Scamodified Job Satisfaction Scale (Spector, 1985)le (Spector, 1985)

32 items32 items

MethodologyMethodologyInstrumentation (cont.)Instrumentation (cont.)

Organizational CommitmentOrganizational Commitment Organizational commitment Organizational commitment

measured by modified Three-measured by modified Three-Component Model (TCM) Component Model (TCM) Employee Commitment Employee Commitment SurveySurvey (Meyer, Allen, & Smith, (Meyer, Allen, & Smith, 19931993 ))

18 items18 items

MethodologyMethodologyInstrumentation (cont.)Instrumentation (cont.)

Turnover IntentionTurnover Intention Turnover intention measured by Turnover intention measured by

modified Turnover modified Turnover QuestionnaireQuestionnaire (Kim, Price, (Kim, Price, Mueller, & Watson, 1996)Mueller, & Watson, 1996)

4 items4 items

MethodologyMethodology Methods of Data AnalysisMethods of Data Analysis

EXCEL, SPSS 14.0, and AMOS EXCEL, SPSS 14.0, and AMOS 6.06.0

Descriptive statistics, Descriptive statistics, Confirmatory Factor Analysis, Confirmatory Factor Analysis, and Structural Equation and Structural Equation Modeling (SEM) Modeling (SEM)

MethodologyMethodology Methods of Data AnalysisMethods of Data Analysis (cont.) (cont.)

Descriptive statistics and Descriptive statistics and reliability scores calculated reliability scores calculated by SPSS 14.0, and structural by SPSS 14.0, and structural equation modeling (SEM) equation modeling (SEM) analysis used AMOS 6.0. analysis used AMOS 6.0.

MethodologyMethodology Methods of Data AnalysisMethods of Data Analysis (cont.) (cont.)

Confirmatory Factor AnalysisConfirmatory Factor Analysis Goodness-of-Fit CriteriaGoodness-of-Fit Criteria

Absolute Fit MeasuresAbsolute Fit MeasuresIncremental Fit MeasuresIncremental Fit MeasuresParsimonious Fit MeasuresParsimonious Fit Measures

Methodology Goodness-of-Fit Example

TurnoverIntention

PaySatisfaction

OrganizationalCommitment

JobSatisfaction

Affective

err11

Normative

err12

T04

err16

T03

err15

T02

err14

T01

err13

JSS01

err01

JSS02

err02

JSS03

err03

Promotion

err05

Supervision

err06

FringeBenefits

err07

Coworkers

err08

NatureofWork

err09

JSS04

err04

res2

res1

res4

Communication

err10

res3

Methodology Goodness-of-Fit Example (cont.)

Goodness-of-fit statistics ValuesDesired range of values for a good fit

Absolute fit measures

Chi-square test χ2 445.76(p<.001)

p>.05

Degrees of freedom df 98 ≥0

Chi-square/ degrees of freedom ratio χ2/df 4.55 2 to 5

Goodness-of-fit index GFI .87 >.90

Root mean square error of approximation RMSEA .10 <.08

Incremental fit measures

Adjusted goodness-of-fit index AGFI .82 >.90

Tucker-Lewis index TLI .83 >.90

Normed fit index NFI .83 >.90

Comparative fit index CFI .86 >.95

Parsimonious fit measures

Parsimonious normed fit index PNFI .68 >.50

Parsimonious goodness-of-fit index PGFI .63 >.50

Methodology Goodness-of-Fit Example

TurnoverIntention

PaySatisfaction

OrganizationalCommitment

JobSatisfaction

Affective

err11

.87

Normative

err12

.81

T04

err16

.84

T01

err13

.77

JSS01

err01

.63

JSS03

err03

.97

Promotion

err05

Supervision

err06

FringeBenefits

err07

.49

Coworkers

err08

.41

NatureofWork

err09

.81

-.01

res2

res1

res4

Communication

err10

.81

.29-1.12

.51 1.40

-.35

-.42

.67

.65

.83

.55.07res3

Methodology Goodness-of-Fit Example (cont.)

Goodness-of-fit statistics ValuesDesired range of values for a good fit

Absolute fit measures

Chi-square test χ2 134.57(p<.001)

p>.05

Degrees of freedom df 44 ≥0

Chi-square/ degrees of freedom ratio χ2/df 3.06 2 to 5

Goodness-of-fit index GFI .94 >.90

Root mean square error of approximation RMSEA .08 <.08

Incremental fit measures

Adjusted goodness-of-fit index AGFI .90 >.90

Tucker-Lewis index TLI .93 >.90

Normed fit index NFI .94 >.90

Comparative fit index CFI .96 >.95

Parsimonious fit measures

Parsimonious normed fit index PNFI .63 >.50

Parsimonious goodness-of-fit index PGFI .53 >.50

Results

1,704 surveys were distributed 392 responses were received Response rate was 23% 37 responses were invalid N = 355

Research Purposes, Hypotheses, and Results Research Purposes Hypotheses Results

The relationships among pay satisfaction, job satisfaction, organizational commitment, and turnover intention

1. Pay satisfaction has a negative relationship with turnover intention.

Rejected

2. Job satisfaction has a negative relationship with turnover intention.

Rejected

3. Organizational commitment has a negative relationship with turnover intention.

Supported

4. Pay satisfaction has a positive relationship with job satisfaction. Supported

4a. Pay satisfaction is a mediator between job satisfaction and turnover intention.

Rejected

4b. Job satisfaction is a mediator between pay satisfaction and turnover intention.

Rejected

5. Pay satisfaction has a positive relationship with organizational commitment.

Rejected

5a. Pay satisfaction is a mediator between organizational commitment and turnover intention.

Rejected

5b. Organizational commitment is a mediator between pay satisfaction and turnover intention.

Rejected

6. Job satisfaction has a positive relationship with organizational commitment.

Supported

6a. Job satisfaction is a mediator between organizational commitment and turnover intention.

Rejected

6b. Organizational commitment is a mediator between job satisfaction and turnover intention.

Supported

Pay Satisfaction

Job Satisfaction

Organizational Commitment

Turnover Intention

Research Purposes, Hypotheses, and Results

(cont.) Research Purposes Hypotheses Results

The relationships among pay satisfaction’s sub-variables and turnover intention

2a. Promotion has a significant relationship with turnover intention.Rejected

2b. Supervision has a significant relationship with turnover intention.Rejected

2c. Fringe benefits have a significant relationship with turnover intention. Rejected

2d. Contingent rewards have a significant relationship with turnover intention. N/A

2e. Operating procedures have a significant relationship with turnover intention. N/A

2f. Coworkers have a significant relationship with turnover intention.Rejected

2g. The nature of work has a significant relationship with turnover intention. Supported

2h. Communication has a significant relationship with turnover intention. Rejected

Turnover Intention

Operating Procedures

Coworkers

Nature of work

Communication

Promotion

Supervision

Fringe Benefits

Contingent Rewards

Research Purposes, Hypotheses, and Results

(cont.) Research Purposes Hypotheses Results

The relationships among organizational commitment’s sub-variables and turnover intention

3a. Affective commitment has a significant relationship with turnover intention.

Supported

3b. Continuance commitment has a significant relationship with turnover intention.

N/A

3c. Normative commitment has a significant relationship with turnover intention.

Supported

Turnover Intention

Normative Commitmen

t

Continuance Commitmen

tAffective Commitmen

t

Turnover Intention

Normative Commitmen

t

Affective Commitmen

t

Nature of work

Organizational Commitment

Job Satisfaction

Pay Satisfaction

Recommendations for Future Study

• Other factors

• Measurements

Pay Satisfaction

Job Satisfaction

Organizational Commitment

Turnover Intention

?

Job Performance

Empowerment

Leadership Styles

Pressure

Working Hours

Personality Traits

Non-Telecommuter

s

Enterprise Culture

Trust

Telecommuters

Burnout

Working Loads

Personal Situation

Socio-demographic

Characteristics

Training

Office Location

Working Status

Recommendations for Future Study (cont.)

• Different groups, industries, cultures, or countries.

• Turnover intention and the actual departure of an employee

Comments or Questions?