There has been an extensive exploration of how organizational climate is related to various business outcomes, but these studies have generally examined outcomes separately or developed univariate measures that combine outcomes. These approaches fail to (a) accommodate the multivariate character of important business results and (b) facilitate the firm's need to achieve success on several dimensions. This research proposes a methodological approach new to the service domain to address these issues. Using data from a large, multinational retail grocery superstore based in continental Western Europe, this study illustrates how multivariate partial least squares (MPLS) models can be used. MPLS provides three interpretable factors of climate—Overall Organizational Climate, Self-Efficacy Versus Leader's Efficacy, and Personal Empowerment Versus Management Facilitation —that are important predictors of three business outcomes: employee retention, customer satisfaction, and scaled revenue. The use of the MPLS approach in other services domains is also explored.
Allen, David M.The Relationship between Variable Selection and Data Augmentation and a Method for Prediction," Technometrics, 16, 125-127.
2.
--- ( 1971), "The Prediction Sum of Squares as a Criterion for Selecting Predictor Variables." Technical Report 23, University of Kentucky, Department of Statistics.
3.
Borucki, Chester C. and Michael J. Burke (1999), "An Examination of Service-Related Antecedents to Retail Store Performance," Journal of Organizational Behavior, 20 (6), 943.
4.
Boulesteix, Anne-Laure and Korbinina Strimmer (2007), "Partial Least Squares: A Versatile Tool for the Analysis of High-Dimension Genomic Data," Briefings in Bioinformatics, 8 (1), 32-44.
Burnham, Allison J., Roman Viveros, and John F. MacGregor (1996), "Frameworks for Latent Variable Multivariate Regression," Journal of Chemometrics, 10, 31-45.
7.
Campbell, John P., Marvin D. Dunnette, Edward E. Lawler, and Karl E. Weick (1970), Managerial Behavior, Performance and Effectiveness. New York: McGraw-Hill .
8.
Collins, Christopher J. and Ken G. Smith (2006), "Knowledge Exchange and Combination: The Role of Human Resource Practices in the Performance of High Technology Firms," Academy of Management Journal, 49 (3), 544-560.
9.
Crotts, John. C., Duncan R. Dickson, and Robert C. Ford (2005), "Aligning Organizational Processes with Mission: The Case of Service Excellence," The Academy of Management Executive, 19 (3), 54-68.
10.
Dean, Alison M. (2004), "Links between Organisational and Customer Variables in Service Delivery: Evidence, Contradictions, and Challenges," International Journal of Service Industry Management, 15 (3-4), 332-350.
11.
Drexler, John (1977), "Organizational Climate: Its Homogeneity with Organizations," Journal of Applied Psychology, 62, 38-42.
12.
Efron, Bradley (1986), "How Biased Is the Apparent Error Rate of a Decision Rule?" Journal of the American Statistical AssociationFornell, Claes and J. Cha (1994), "Partial Least Squares," in Advanced Methods of Marketing Research, R. P Bagozzi , eds. Oxford, UK: Blackwell , 52-78.
13.
--- and Fred L. Bookstein (1982), "Two Structural Equation Models: LISREL and PLS Applied to Consumer Exit-Voice Theory," Journal of Marketing Research, 19 (November), 440-452.
14.
Frank, Ildiko E. (1989), "Comparative Monte Carlo Study of biased Regression Techniques," Technical Report LCS 105, Stanford University, Department of Statistics.
15.
--- and Jerome H. Friedman (1993), "A Statistical View of Some Chemometrics Regression Tools," Technometrics, 35,109-135.
16.
Gavin, James R. and John G. Howe (1975), "Psychological Climate: Some Theoretical and Empirical Considerations," Behavioral Science, 20, 228-240.
17.
Gelade, Garry A. and Stephen Young (2005), "Test of a Service Profit Chain Model in the Retail Banking Sector," Journal of Occupational and Organizational Psychology, 78 (1): 1-22.
18.
Glick, William H. (1985), "Conceptualizing and Measuring Organizational and Psychological Climate: Pitfalls in Multi-Level Research," Academy of Management Review, 10, 601-616.
19.
Hallowell, Roger and Leonard A. Schlesinger (2000), "The Service Profit Chain: Intellectual Roots, Current Realities, and Future Prospects," in Handbook of Services Marketing and Management, Teresa A. Swartz and Dawn Iacobucci, eds. Thousand Oaks, CA: Sage, 203-221.
20.
Harter, James K., Frank L. Schmidt, and Theodore L. Hayes (2002), "Business-Unit-Level Relationship between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis," Journal of Applied Psychology, 87 (2), 268-279.
21.
--- and Ame Creglow (1999), "Appendix E: The Meta-Analysis," in First Break All the Rules, Marcus Buckingham and Curt Coffman, eds. New York: Simon & Schuster, 255-267.
22.
Hemingway, Monica A. and Carlla S. Smith (1999), "Organizational Climate and Occupational Stressors as Predictors of Withdrawal Behaviors and Injuries in Nurses," Journal of Occupational and Organizational Psychology , 72 (3), 285-299.
23.
Heskett, James L., W. Earl Sasser Jr., and Leonard A. Schlesinger (1997), The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction and Value. New York: Free Press.
24.
---, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr. , and Leonard A. Schlesinger (1994), "Putting the Service-Profit Chain to Work," Harvard Business Review, 72, (2), 164-174.
25.
Jagpal, Harsharanjeet S. (1982), "Multicollinearity in Structural Equation Models with Unobservable Variables," Journal of Marketing Research , 19 (November), 431-439.
26.
--- (1981), Measuring Joint Advertising Effects in Multiproduct Firms," Journal of Advertising Research, 21 (1), 65-69.
27.
James, Lawrence R. (1982) "Aggregation Bias in Estimates of Perceptual Agreement ," Journal of Applied Psychology, 67 (2), 219-229.
28.
James, Lois A. and M.D. McIntyre (1996), "Perceptions of Organizational Climate," in Individual Differences and Behavior in Organizations, K. R. Murphy, ed. San Francisco: Jossey-Bass, 416-450.
29.
--- and Lawrence R. James (1989), "Integrating Work Environment Perceptions: Explorations into the Measurement of Meaning," Journal of Applied Psychology, 74, 739-751.
30.
--- and Allan P. Jones (1974), "Organizational Climate: A Review of Theory and Research," Psychological Bulletin, 81 (12), 1096-1112.
31.
Johnson, Jeff W. (1996), "Linking Employee Perceptions of Service Climate to Customer Satisfaction," Personnel Psychology, 49 (4), 831-851.
32.
Joyce, William F., and John W. Slocum Jr. (1979), "Climates in Organizations ," in Organizational Behavior, S. Kerr, ed. Columbus, OH: Grid Publishing, 317-333.
33.
Kaiser, H.F. (1958), "The Varimax Criterion for Analytic Rotation in Factor Analysis, Psychometrika, 23, 187-200.
34.
Kamakura, Wagner, Vikas Mittal, Fernado de Rosa, and José Afonso Mazzon (2002), "Assessing the Service Profit Chain," Marketing Science, 21, (3), 294-317.
35.
Keiningham, Timothy L., Lerzan Aksoy, Bruce Cooil, Kenneth Peterson, and Terry G. Vavra (2006), "A Longitudinal Examination of the Asymmetric Impact of Employee and Customer Satisfaction on Retail Sales ," Managing Service Quality, 16 (5), 442-459.
36.
Lawler, E.E., D.T. Hall, and G.R. Oldham (1974), "Organizational Climate: Relationship to Organizational Structure, Process and Performance," Organizational Behavior and Performance, 11, 139-155.
37.
Lewin, Kurt, R. Lippitt, and R.K. White (1939), "Patterns of Aggressive Behavior in Experimentally Created Social Climates," Journal of Social Psychology, 10, 271-301.
38.
Liao, Hui and Aichia Chuang (2004), "A Mutlilevel Investigation of Factors Influencing Employee Service Performance and Customer Outcomes," Academy of Management Journal, 47 (1), 41-58.
39.
Loveman, Gary W. (1998), "Employee Satisfaction, Customer Loyalty, and Financial Performance: An Empirical Examination of the Service Profit Chain in Retail Banking," Journal of Service Research, 1, (1), 18-31.
40.
March, J. and H. Simon (1958), Organizations. New York: John Wiley.
41.
McIntosh, A.R., F.L. Bookstein, J.V. Haxby, and C.L. Grady (1996), "Spatial Pattern Analysis of Functional Brain Images Using Partial Least Squares," Neuroimage, 3, 143-157.
42.
MIT Sloan Management Review (2001), "From the Editors," 42 (3), 6.
43.
Mulki, Jay Prakash, Fernando Jaramillo, and William B. Locander (2006), "Effects of Ethical Climate and Supervisory Trust on Salesperson's Job Attitudes and Intentions to Quit ," Journal of Personal Selling and Sales Management, 26 (1), 19-26.
44.
Ozcelik, Hakan, Nancy Langton, and Howard Aldrich (2008), "Doing Well and Doing Good: The Relationship between Leadership Practices that Facilitate a Positive Emotional Climate and Organizational Performance," Journal of Managerial Psychology, 23 (2), 186.
45.
Paradise-Tornow, C.A. (1991), "Management Effectiveness, Service Quality and Organizational Performance in Banks," Human Resource Planning , 30 (3), 335-364.
46.
Patterson, Malcolm G., Michael A. West, Viv J. Shackleton, Jeremy F. Dawson, Rebecca Lawthom, Sally Maitlis, David L. Robinson, and Alison M. Wallace (2005), "Validating the Organizational Climate Measure: Links to Managerial Practices, Productivity and Innovation ," Journal of Organizational Behavior, 26, 379-408.
47.
Payne, Roy and Roger Mansfield (1978), "Correlates of Individuals' Perceptions of Organizational Climate," Journal of Occupational Psychology, 51, 209-218.
48.
--- and Diana C. Pheysey (1971), "G. G. Stern's Organizational Climate Index: A Reconceptualization and Application to Business Organizations," Organizational Behavior and Human Performance, 6, 77-78.
49.
Payne, Stephanie C. and Sheila S. Webber (2006), "Effects of Service Provider Attitudes and Employment Status on Citizenship Behaviors and Customers' Attitudes and Loyalty Behavior," Journal of Applied Psychology, 91, 365-378.
50.
Peterson, Shari L. (2004), "Toward a Theoretical Model of Employee Turnover: A Human Resource Perspective," Human Resource Development Review, 3 (3), 209-227.
51.
Quinn, Robert E. and Michael R., McGrath (1985), "The Transformation of Organizational Culture: A Competing Values Perspective," in Organizational Culture, P. J. Frost, L. F. Moore, C. C. Lundberg , and J. Martin, eds. Beverly Hills, CA: Sage, 315-344.
52.
--- and John Rohrbaugh (1983), "A Spatial Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis," Management Science, 29, 363-377.
53.
--- and --- (1981), "A Competing Values Approach to Organizational Effectiveness," Public Productivity Review, 5, 122-140.
54.
Ribbink, Dina, Allard C.R. van Riel, Veronica Liljander, and Sandra Streukens (2004), "Comfort Your Online Customer: Quality, Trust and Loyalty on the Internet," Managing Service Quality, 14 (6), 446-456.
55.
Rodgers, Joseph L., W. Alan Nicewander, and Larry Toothaker (1984), "Linear Independent, Orthogonal, and Uncorrelated Variables," The American Statistician, 38 (2), 133-134.
56.
Rogg, Kirk L., David B. Schmidt, Carla Shull, and Neal Schmitt (2001), "Human Resource Practices, Organizational Climate and Customer Satisfaction," Journal of Management, 27, 431-449.
57.
Rousseau, Denise M. (1988), The Construction of Climate in Organizational Research, in International Review of Industrial Psychology, Vol. 3, C. L. Cooper and I. T. Robertson, eds. New York: John Wiley, 139-158.
58.
Rucci, Anthony J., Steven P. Kirn, and Richard T. Quinn (1998), "The Employee-Customer Profit Chain at Sears," Harvard Business Review, 76 (1), 82-97.
59.
Ryan, Ann Marie, Mark J. Schmit, and Raymond Johnson (1996), "Perceptions and Effectiveness: Examining Relations at an Organizational Level," Personnel Psychology, 49 (4), 853-882.
60.
Salanova, Maria, Sonia Agut, and Jose Maria Peiro (2005), "Linking Organizational Resources and Work Engagement to Employee Performance and Customer Loyalty: The Mediation of Service Climate," Journal of Applied Psychology , 90 (6), 1217-1227.
61.
Schlesinger, Leonard A. and James L. Heskett (1991), "Breaking the Cycle of Failure in Services," Sloan Management Review, 32 (3), 17-28.
62.
Schneider, Benjamin (1994), "HRM-A Service Perspective: Towards a Customer-Focused HRM," International Journal of Service Industry Management , 5 (1), 64-76.
63.
---, Mark G. Ehrhart, David M. Mayer, Jessica L. Saltz, and Kathryn Niles-Jolly (2005), "Understanding Organization-Customer Links in Service Settings," Academy of Management Journal , 48 (6), 1017-1032.
64.
---, and Susan S. White (2004), Service Quality: Research Perspectives, Thousand Oaks, CA: Sage.
65.
---, Paul J. Hanges, D. Brent Smith, and Amy Nicole Salvaggio (2003), "Which Comes First: Employee Perceptions or Organizational Financial and Market Performance?" Journal of Applied Psychology, 88 (5), 836-851.
66.
---, Amy Nicole Salvaggio, and Montse Subirats (2002), "Climate Strength: A New Direction for Climate Research," Journal of Applied Pscyhology , 87 (2), 220-229.
67.
---, Brent D. Smith, and Harold W. Goldstein (2000), "Attraction-Selection-Attrition: Toward a Person-Environment Psychology of Organizations," in New Directions in Person-Environment Psychology, W. Bruce Walsh, ed. Hillsdale, NJ: Lawrence Erlbaum.
68.
---, Susan S. White, and Michelle C. Paul (1998), "Linking Service Climate and Customer Satisfactions of Service Quality: Test of a Causal Model," Journal of Applied Psychology, 83 (2), 150-163.
69.
---, John P. Parkington, and Virginia M. Buxton (1980), "Employee and Customer Satisfactions of Service in Banks," Administrative Science Quarterly, 25, 252-267.
70.
--- and R.A. Snyder (1975), "Some Relationships between Job Satisfaction and Organizational Climate," Journal of Applied Psychology, 60, 318-328.
71.
Semeijn, Janjaap, Allard C. R. van Riel, Marcel J. H. van Birgelen, and Sandra Streukens (2005), "E-Services and Offline Fulfillment: How E-Loyalty Is Created," Managing Service Quality , 15 (2), 182-194.
72.
Solnet, David (2006), "Introducing Employee Social Identification into Satisfaction Research," Managing Service Quality, 16 (6), 575-594.
73.
Sowinski, D., K. Fortmann, and D. Lezotte (2008), "Climate for Service and the Moderating Effects of Climate Strength on Customer Satisfaction, Voluntary Turnover and Profitability ," European Journal of Work and Organizational Psychology , 17 (1), 73-88.
74.
Stone, M. (1977), "An Asymptotic Equivalence of Choice of Model by Cross-Validation and Akaike's Criterion," Journal of the Royal Statistical Society, Series B, 39 (1), 44-47.
75.
--- and R.J. Brooks (1990), "Continuum Regressing: Cross-Validated Sequentially Constructed Prediction Embracing Ordinary Least Squares, Partial Least Squares and Principal Components Regression (with discussion)," Journal of the Royal Statistical Society, Series B, 52 (2), 237-269.
76.
Sundberg, Rolf (2002), "Shrinkage Regression," in Encyclopedia of Environmetrics, Vol. 4, 1994-1998, Abdel H. El-Shaarawi and Walter W. Piegorsch., eds. Chichester, UK: Wiley.
77.
Taylor, Frederick W. (1911), Principles of Scientific Management, New York: Norton.
78.
Tobias, Randall D. (1997), An Introduction to Partial Least Squares Regression, SAS Technical Note 509. Cary, NC: SAS Institute.
79.
White, Chris J., P. Rajan Varadarajan, and Peter A. Dacin (2003), "Market Situation Interpretation and Response: The Role of Cognitive Style, Organizational Culture, and Information Use," Journal of Marketing, 67(July), 63-79.
80.
Yang, Yuhong (2005), "Can the Strengths of AIC and BIC Be Shared? A Conflict between Model Estimation and Regression Estimation," Biometrika, 92 (4), 937-950.
