Master Thesis Human Resource Studies Do employee ratings of HR effectiveness impact task performance? The mediating role of intrinsic motivation and the moderating role of leadermember exchange Student: Marloes Leeijen SNR: 1256805 Supervisor: Jeske van Beurden Second assessor: Marinus Verhagen January 2018 - August 2018 Tilburg University – School of Social and Behavioral Sciences Abstract The purpose of this study was to get more understanding of the establishment of the link between HRM and performance In line with the AMO theory (Appelbaum et al., 2001) it was assumed that the perceptions employees have about the effectiveness of HR practices (i.e employee development, career opportunities, performance management, job design, communication and information sharing, rewards, participation, work-life balance and job security) positively impacts their task performance Furthermore, based on the AMO theory and the self-determination theory (Ryan & Deci, 2000), the expectations were made that intrinsic motivation was one of the mechanisms through which perceived effectiveness of HR practices increases task performance and additionally, that Leader-Member Exchange (LMX) would strengthen the positive relationship between the employees’ HR effectiveness ratings and intrinsic motivation A cross-sectional survey study among 464 employees was conducted in which we, among others, collected effectiveness ratings of nine different HR practices The main findings of this study are that the perceived effectiveness of the HR practices not lead to higher levels of task performance and for three HR practices it lead to a lower level of task performance (i.e career opportunities, performance management and employee development) In addition, the mediation effect of intrinsic motivation was only found for two of the HR practices (i.e performance management and employee development) and LMX was not found as a moderator, except for one of the practices (i.e job security) However, it turned out LMX did have a positive relationship with intrinsic motivation Furthermore, the results of this study, the limitations, the suggestions for future research and the practical and theoretical implications are discussed Keywords: perceived HR effectiveness, task performance, intrinsic motivation, LMX, AMO theory, self-determination theory Introduction Researchers in Human Resource Management (HRM) generally agree that the implementation of HR practices leads to higher organizational performance (Den Hartog & Verburg 2004) These statements resulted in a more positive view on investment in HRM among managers (Edgar & Geare, 2014) However, there remains ambiguity on how exactly the HRM-performance link is established (Edgar & Geare, 2014) For example, there often seems to be a gap between how HR practices were implemented by managers and how workers perceive the HR practices (Edgar & Geare, 2014) In line with this is the Strategic Human Resource Management (SHRM) process model, which shows that there is not a direct relationship between actual HR practices offered by the organization and the reaction of the employee to these practices, but what accounts for this relationship is how an employee perceives the HR practices (Nishii & Wright, 2007) In addition, using HR practices does not imply that employees experience practices as supportive for their work performance (Nishii & Wright, 2007) Likewise, according to Meyer and Allen (as cited in Edgar & Geare, 2014), the perceptions employees have about the HR practices has more impact on their performance than how many or which HR practices are actually implemented in reality Therefore, this research investigates employee perceptions about HR practices in terms of HR effectiveness ratings for their work performance in relation to employee performance This is in contrast to previous studies that were focused on perceptions of HR practices in terms of availability or use of HR practices (see e.g., Boon, Den Hartog, Boselie & Paauwe, 2011; Den Hartog & Verburg, 20 04; Guthrie, 2001) The focus will be on task performance because this form of employee performance is related to fulfilling the core tasks of your role in a proper way (Griffin, Neal, & Parker, 2007) The task performance will be self-reported by the employee A problem in the HRM literature, is that we not sufficiently know what is inside the so called black box that should explain how and why HR practices increase performance (Boselie, Dietz & Boon, 2005; Chowhan, 2016; Nishii & Wright, 2007) Therefore, by using the AMO theory (Appelbaum, Bailey, Berg & Kalleberg, 2001) and the self-determination theory (Ryan & Deci, 2000) this research will focus on intrinsic motivation as a possible mechanism through which HR practices, and in particular, the employees’ HR effectiveness ratings, affect employee performance The AMO theory states that the performance of an employee is determined by the combination of the employees’ abilities, motivation and opportunities (AMO) to perform (Gerhart, 2007) According to Jiang et al (2012) performance can be improved by using HRM systems, when these systems are enhancing the three factors (AMO) of performance Taking these statements into consideration, one would expect that motivation is one of the mechanism through which employees’ HR effectiveness ratings affect the level of performance However, it is important to notice that there are different types of motivation The most basic distinction that is often been made is between intrinsic and extrinsic motivation (Ryan & Deci, 2000) In this research the focus will be on intrinsic motivation because, by following the self-determination theory, it is expected that when HR practices are perceived as effective, this will help to fulfil people’s psychological needs (i.e to feel more competent, to feel related to others and to possess a level of autonomy), which results in people being intrinsically motivated and therefore perform better (Ryan & Deci, 2000) Besides, another factor that is stated in previous research to support an individual's feeling of autonomy, competence and relatedness, and may therefore enhance intrinsic motivation, is the relationship between a manager and subordinate which is called: Leader-Member Exchange (LMX) (Martin, Guillaume, Thomas, Lee & Epitropaki, 2016; Ryan & Deci, 2000) In addition, the quality of the LMX relationship seems to have a strong impact on the perceptions employees have regarding the quality of HR practices (Sanders, Moorkamp, Torka, Groeneveld, & Groeneveld, 2010) Accordingly, it is expected that the positive relationship between HR effectiveness ratings and intrinsic motivation will be stronger when a good relationship between manager and subordinate is perceived As a consequence, LMX will be another focus in this research This research will be of scientific relevance for a couple of reasons First of all, employees HR effectiveness ratings will be taken into consideration instead of the perceived use or availability of HR practices, which was the main focus of previous research (see e.g., Boon, Den Hartog, Boselie & Paauwe, 2011; Den Hartog & Verburg, 2004; Guthrie, 2001) In addition, this research will help identifying whether intrinsic motivation is a mechanisms that exist inside the black box, and will therefore contribute to specify the process through which HR and performance impact each other (Nishii & Wright, 2007) Last, when the effect of LMX on the relationship between HR effectiveness ratings and intrinsic motivation is clarified, this can give insight in how to enhance one of the mechanism that exists inside the black box Furthermore, investments in HR are often expensive for organizations (Sels et al., 2002) Therefore it is useful for employers to know whether their investments will pay off in terms of improved performance of the employee and benefits for the organizational performance, which indicates the practical importance of this study This research will give insight to employers how HRM can have a positive impact on the performance of the employees and to what extent this is through intrinsic motivation Besides, when LMX turns out to enhance the relationship between HR effectiveness ratings and intrinsic motivation, this can encourage employers to pay more attention to the relationship between managers and subordinates The information above leads to the following research question: To what extent employees’ HR effectiveness ratings affect individual task performance and to what extent is this relationship mediated by intrinsic motivation and moderated by LMX? Theoretical framework The relationship between employees’ HR effectiveness ratings and task performance “HR practices represent the activities related to the management of work and employment in organizations” (Beijer, 2014, p 3) The study of Beijer (2014) emphasizes the importance of acknowledging the different measures of the HR practices construct A distinction should be made between the intended HR practices and how these practices were implemented (Beijer, 2014) Besides, a difference should be made between the manager perspective and the employee perspective of the implemented HR practices (Beijer, 2014) These different constructs were built on the SHRM Process model of Wright and Nishii (2007), which explains the process through which HR practices affect performance and the variability that arises in the different steps of that process First of all, there seems to be a difference between the actual HR practices offered by the organization (which Beijer (2014) conceptualizes: the manager perspective of the implemented HR practices) and how the HR practices were intended by the management Second, the perceptions employees have of the HR practices (which Beijer (2014) conceptualizes to as: the employee perspective of the implemented HR practices) are often not in line with the actual HR practices Additionally, the model emphasizes the importance of the employee perceptions of the HR practices when predicting the reaction of that employee, which in turn has an effect on the performance (Wright & Nishii, 2007) Besides, according to Wright and Nishii (2007) employees not all respond in the same way to similar HR practices offered by an organization and they not all share the same perception of these HR practices As Beijer (2014) acknowledges it is important to specify which specific construct of HR practices is studied and as the SHRM Process model (Wright & Nishii, 2007) shows, the construct of HR practices that is the most direct predictor of employee reactions to HR practices is the perceptions they have of these practices Accordingly, in this research the focus will not be on the intended or actual HR practices offered by the organization but on the perceptions employees have of these practices In more detail, the independent variable in this study will be employee’s perceived effectiveness of the HR practices offered by the organization and in particular, how effective the employees perceive these practices for their performance The nine HR practices that are examined in this research belong to the general categories of HR practices that are most used in current research (Boselie et al., 2005) and involve: employee development, career opportunities, performance management, job design, communication and information sharing, participation, work-life balance, job security and rewards In this research the perceived effectiveness of all nine practices will be examined separately because the HR practice approach was followed This approach sees HRM as: “a collection of multiple, separate practices without any mutually reinforcing effects” (Veld, 2012, p 132) This approach is used in order to be able to find out which practices are most important in developing the desirable outcomes (Veld, 2012) and is therefore used in this study to be able to give extensive, practical recommendations to organizations When the HR practices would be approached as a bundle, detailed advice about the differences in effect of the distinct HR practices could not be given In addition, the dependent variable in this research is task performance In this research the performance of individual employees will be measured and this will be done at the proficiency level When an employee’s performance is classified to the level of proficiency he or see “fulfills the prescribed or predictable requirements of the role” (Griffin et al, 2007, p.330) The concept of the individual level of proficiency is closely related to task performance, hence, the dependent variable in this research is called task performance The AMO theory (Appelbaum et al., 2001) is frequently used to explain the link between HRM and performance Whereas other theories are often focused on organizational performance, the AMO theory takes into account individual features of employees and is therefore applicable to the performance of the individual employee (Paauwe, 2009) The AMO theory indicates that whether employees are able to perform well, depends on three factors (Bos-Nehles, Van Riemsdijk, & Kees Looise, 2013) First of all, an employee should have the ability to perform, which means he or she should have possessing of the right knowledge and competences Second, the employee should have the motivation to perform, because they feel like they have sufficient reasons and get properly rewarded for it Last, the employee should have the opportunity to perform, which depends on how supportive the work environment is (Bos-Nehles et al., 2013) When the HR practices are deployed in an effective way, they can enhance employee’s ability, motivation and opportunity, which will affect the individual task performance in a positive way (Jiang et al., 2012) Therefore, by following the AMO theory, one would expect that when the HR practices are considered as effective, this enhances the task performance Besides, previous research also supports the assumption that (employees’ perceptions of) HR practices are positively related to performance and that this may occur by influencing the abilities, motivation and attitudes of employees (Alfes, Truss, Soane, Rees & Gatenby, 2013; Huselid, 1995; Parker et al., 2003) In accordance, Wright and Nishi (2007) state that employee outcomes are influenced by the perceptions employees have of the HR practices offered by the organization Therefore, when following the AMO theory and empirical evidence, a positive relationship would be expected between the perceived effectiveness of HR practices and task performance Hypothesis 1: Employees’ HR effectiveness ratings for their work performance is positively associated with task performance The relationship between employees’ HR effectiveness ratings, intrinsic motivation and task performance When someone is motivated this means he or she is “moved to something” (Ryan & Deci, 2000, p 54) There is not only a difference in how motivated people are, but also what the orientation of the motivation is (Ryan & Deci, 2000) A distinction has been made between two types of motivation, namely, extrinsic motivation and intrinsic motivation Extrinsic motivation is defined as: “doing something because it leads to a separable outcome” (Ryan & Deci, 2000, p 55) Whereas intrinsic motivation refers to “doing something because it is inherently interesting or enjoyable” (Ryan & Deci, 2000, p 55) In this study the focus will be on intrinsic motivation in relation to HR effectiveness ratings and task performance, which will be explained using the AMO theory (Appelbaum et al., 2001) and self- determination theory (Ryan & Deci, 2000) In the previously discussed AMO theory, it is explained that motivation is an important factor for explaining the relationship between HR and performance: employees are able to perform well, when they feel like they have sufficient reasons and get properly rewarded for it (Bos-Nehles et al., 2013) To explain the motivational aspect of the model in more detail, the notion of reciprocity should be taken into consideration This means that the way an employee is treated by the organization, will be exchanged by the corresponding behavior of an employee (Boxall & Purcell, 2016) Accordingly, employees’ willingness to perform properly for the organization, depends on the way the organization performs towards the employee (Boxall & Purcell, 2016) Therefore, when employees feel like the organization wants to invest in them, by means of effective HR practices, they will respond by means of devotion and exertion, which enhances the performance (Boxall & Purcell, 2016) By following this explanation and the AMO theory, it is expected that motivation is one of the mechanisms through which perceived effectiveness of HR practices increases task performance Because other mechanisms are explained by the AMO theory as well (i.e ability and opportunity), one would expect intrinsic motivation only to partially mediate this relationship Why specifically intrinsic motivation is of interest in this study can be explained using the self-determination theory of Ryan and Deci (2000) This theory explains that there are three basic human needs and by fulfilling these needs, a person’s well-being will be optimized (Seligman & Csikszentmihalyi, 2014; Schultz & Schultz, 2016) The three basic human needs are: the need for competence, when one has confidence that he or she can complete difficult tasks The need for autonomy: when one has the freedom to decide how he or she does the work, based on their interests, needs and values And last, the need for relatedness: when one feels closely connected to others (Seligman & Csikszentmihalyi, 2014; Schultz & Schultz, 2016) Ryan and Deci (2000) state that when the three basic human needs are satisfied, people’s intrinsic motivation will be stimulated We expect that higher HR effectiveness ratings of the aforementioned HR practices can help fulfilling the three basic needs For example, when an employee believes following a certain training was effective, this can satisfy the need for competence, or when he or she has the opportunity to have an influence on their job design, this can satisfy the need for autonomy Last, Baard, Deci and Ryan, 2004 conducted a study which turned out that satisfaction of the three basic human needs also leads to higher work performance As these needs result in intrinsic motivation, this indicates the relevance of intrinsic motivation for task performance as well Based on the literature and theories discussed, the following hypotheses are formulated: Hypothesis 2: Employees’ HR effectiveness ratings are positively associated with intrinsic motivation Hypothesis 3: Intrinsic motivation is positively associated with task performance Hypothesis 4: The positive relationship between employees’ HR effectiveness ratings and task performance is partially mediated by intrinsic motivation The moderating role of LMX in the relationship between HR effectiveness ratings and intrinsic motivation Leader-Member Exchange (LMX) focuses on the dyadic and unique relationship managers possess with each subordinate (Ilies, Nahrgang, & Morgeson, 2007) The theory associated with LMX is the LMX theory and gives a broader understanding of the concept It explains that leaders (managers) differ in the quality of exchange relationship they have with each of their subordinates and that this has an influence on the behavior and attitudes of the manager and subordinate (Ilies et al., 2007) Furthermore, Sanders et al (2010) state that a relationship of good quality between a manager and an employee and the employees’ experience of the quality of the HR practices can stimulate each other Therefore, one might expect that the relationship between employees’ HR effectiveness ratings and intrinsic motivation will be stronger when the relationship between manager and subordinate is better The aforementioned self-determination theory can help to explain the expected strengthening effect of LMX, because it is expected that LMX affects the fulfillment of the three needs explained by this theory (Gagné & Deci, 2005; Graves & Luciano, 2013) An employee’s level of fulfillment of the need for competence, autonomy and relatedness is influenced by the perception that the employee has of the quality of the relationship they have with their manager (Graves & Luciano, 2013) In a high-quality exchange relationship, the manager will help the employee in developing necessary skills and abilities, the manager will give the employee freedom and autonomy and last, the manager will make sure an employee feels valued, encouraged and supported (Erdogan & Enders, 2007; Graves & Luciano, 2013; Henderson, Wayne, Shore, Bommer & Tetrick, 2008) Therefore, the need for competence, autonomy and relatedness can be further fulfilled when experiencing a positive relationship with the manager Also, as previously explained, we expect that perceived HR effectiveness can help to fulfil the three basic human needs, which results in an increased level of intrinsic motivation (Ryan & Deci, 2000) When we suppose LMX also helps to satisfy those needs, we can expect that when a positive LMX relationship exists, this will strengthen the effect of perceived HR effectiveness on intrinsic motivation Besides, as Ryan and Deci (2000) state that when the three basic human needs are fulfilled, this will stimulate the intrinsic motivation, it is also expected that LMX has a direct, positive effect on intrinsic motivation Therefore, we come to the following hypotheses: Hypothesis 5: Leader-Member Exchange will strengthen the positive relationship between employees’ HR effectiveness ratings and intrinsic motivation Hypothesis 6: Leader-Member Exchange is positively associated with intrinsic motivation Figure Conceptual model Note HR effectiveness ratings include the effectiveness ratings of the following HR practices: employee development, career opportunities, performance management, job design, communication and information sharing, rewards, participation, work-life balance and job security Method Research design A quantitative, cross-sectional study has been executed This explanatory study tested the conceptual model displayed in Figure 10 master students collaboratively collected the data for this research and searched for respondents by using their own network The intention was that every student would invite 50-100 respondents, which means the total, intended sample was 500 to 1000 employees Population and sample In the end, the actual number of employee respondents of this study was 464 (N=464), with a response rate of 62.3% Additionally, the number of manager respondents was 76 (N=76), with a response rate of 80.9% The demographic characteristics of this sample can be found in Table in Appendix A The population of this study were employees who are working in organizations in five different industries in the Netherlands These five industries include 10 57 58 59 60 61 62 Appendix H Cover letter managers Tilburg, April 2018 Dear Sir, Madam, You receive this letter as an explanation for the research you have been invited to participate in by one of your employees [NAME] This person has participated in the research of Master students of the Master program Human Resource Studies on work experience We would also like to invite you to participate in this research Reason for this research Most people spent a (large) part of their lives at work Work can be a source for inspiration, but also a source for stress In the context of our Master Human Resource Studies at Tilburg University, I am, together with other students, investigating how employees experience their work In our research we are interested in the employees’ perception of the working environment and which aspects influence this work experience The research To get the most complete impression of the employees’ working environment, we have developed two different questionnaires for managers and their employees Filling out the manager questionnaire will take you approximately 15 minutes For this research it is important to link different research data In order to be able to this, we have given a code to the employee who invited you We ask you to fill out this code [CODE] within the questionnaire when it is requested Instructions questionnaire manager The questionnaire for the manager consist of two parts The first part contains questions about personnel management within your department The second part contains questions about the behavior at work of the employee who participated in this study Before starting a new part, please read the corresponding instructions Confidentiality of the data Your data will only be collected for our scientific research if you decide to participate in this research We want to emphasize that participating in this research is voluntary, and answers will be treated confidentially You have the right to decline to participate and withdraw from the research once participation has begun, without any negative consequences, and without providing any explanation Furthermore, no names of questions or persons will be mentioned in the research papers 63 When you have any questions or suggestions, you can contact our Master thesis supervisors For any comments or complaints about this research you can contact the “Ethics Review Board” (who approved this research) of Tilburg School of Social and Behavioral Sciences Click on the link below to continue to the questionnaire: https://tilburgss.co1.qualtrics.com/jfe/form/SV_eFZFiEPGqOFdBzL Thank you in advance for participating in this research! With kind regards, Kristie Bakker Femke van den Bergh Imke Boonen Anneloes van Eijk Pleun van Gestel Eline Hamberg Roxy Janssen Marloes Leeijen Paularin Pascha Marieke ter Steege On behalf of the master students HRS, Tina Peeters Promovenda (thesis supervisor) Tilburg University Jeske van Beurden Promovenda & Docent (thesis supervisor) Tilburg University 64 Appendix I Questionnaire managers 65 66 67 68 69 Appendix J Flyer 70 Appendix K Table overview frequencies use and effectiveness per HR practice HR Practice Employee Development Item Item Item Career Opportunities Item Item Item Performance Management Item Item Item Job Design Item Item Item Participation Item Item Item Communication and Information Sharing Item Item Item Item Work-Life Balance Item Item Item Job Security Item Item Item Rewards Item Item Item Item Use Effective Not use Effective 292 416 260 200 345 178 166 42 198 73 21 74 178 228 256 98 78 89 280 230 202 64 38 45 376 320 260 109 154 120 82 138 198 21 59 57 405 368 413 270 272 309 53 90 45 29 60 17 160 382 306 72 168 161 298 76 152 70 10 32 396 357 413 235 156 163 167 94 62 101 45 223 17 32 19 45 276 356 357 111 181 138 182 102 101 32 35 16 322 303 299 126 127 113 136 155 159 29 36 35 135 191 89 63 47 53 30 18 323 267 369 395 102 74 97 76 71 ... relationship between employee? ??s HR effectiveness ratings and task performance Besides for most of the HR practices the total effect from HR effectiveness ratings on task performance was insignificant... effect of the HR effectiveness ratings on intrinsic motivation (H2), the direct effect of intrinsic motivation on task performance (H3), whether the direct effect of HR effectiveness ratings and task. .. the perceived effectiveness of HR practices and task performance Hypothesis 1: Employees’ HR effectiveness ratings for their work performance is positively associated with task performance The