The Effect of Transactional and Transformational Leadership Styles on the Organizational Commitment and Job Satisfaction of Customer Contact Personnel

ABSTRACT Customer satisfaction depends, to a large extent, on the attitude of customer contact personnel. This study examines the effect of transactional and transformational leadership on the organizational commitment and job satisfaction of customer contact personnel in banking and food store organizations. The results indicate that the transformational factors of charisma, intellectual stimulation, and individual consideration are more highly correlated with job satisfaction and organizational commitment than the transactional factors of contingency reward and management- by-exception. Also, leader charisma, by itself, is an excellent predictor of employee attitude. As such, this factor appears to have value in leader selection and training programs within the service sector. INTRODUCTION Ever increasing competition has driven companies to focus on customer satisfaction. A major determinant of customer satisfaction within the service industry is the attitude of customer contact personnel (Heskett et al., 1990; Parasuraman et al., 1991). This relationship is succinctly summarized by John Smith, former CEO of Marriott Corporation, by the phrase, "you can't have happy customers served by unhappy employees" (Heskett, et al., 1997). Similarly, Heskett (1987) suggests the following sequential relationship to describe successful service firms: "great employee satisfaction begets high employee motivation begets high level of service quality compared with the level the customer expects begets high customer satisfaction begets increased sales volume. " Along the same line, Schneider & Bowen (1985a) and Marshall (200 1 ) report that service cultures with the highest organizational commitment and lowest employee turnover consistently report the highest levels of customer satisfaction. Further, Bowen & Schneider (1988) noted that a high percentage of the time when customers report unfavorable views of service quality, they also report having servers with bad attitudes or overhearing employees complain about their jobs and surroundings. A major determinant of an employee's attitude is his/her perception of their immediate supervisor (Yammarino & Dubinsky, 1992). As such, it seems reasonable to assume that some styles of leadership may be more effective than others at gaining the commitment of customer contact personnel. Heretofore, the vast majority of research on leadership, as an antecedent of employee performance, has been on the effect of task-oriented or people-oriented leadership styles. The purpose of this study is to examine the effect of transactional and transformational leadership styles on the performance (job satisfaction, organizational commitment) of customer contact personnel. THEORETICAL ISSUES AND HYPOTHESES The discussion of theoretical issues is divided into two sections. First, we will review some research on the relationship between two surrogates of employee attitude (i.e., organizational commitment and job satisfaction) and customer satisfaction. Second, the dimensions of transformational and transactional leadership are defined and examined in terms of their effect on employee attitude. Subsequently, hypotheses are developed to examine whether transformational leadership or transactional leadership is more correlated with a positive employee attitude. Employee Attitude and Customer Satisfaction Two of the more popularly researched components of employee attitude are organizational commitment and job satisfaction (Porter et al., 1974; Kanungo, 1982). One study found that organizational commitment reflects an employee's identification and involvement with a particular organization. More specifically, it embraces three dimensions: "(a) a strong belief in and acceptance of the organization's goals and values; (b) a willingness to exert considerable effort on behalf of the organization; and (c) a strong desire to maintain membership in the organization" (Mowday et al. …