Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 EMPOWERMENT AND EMPLOYEE MOTIVATION IN BANKING: A MALAYSIA PERSPECTIVE Azzarina Zakaria Manchester Business School United Kingdom azzarina.zakaria@postgrad.mbs.ac.uk Abstract Empowerment has been highly regarded as an essential strategy for employee motivation in the modern business environment. Though there is presumed linked between empowerment and employee motivation in the literature, limited empirical research has attempted investigation on the relationship between the two. This paper contributes to the gap by offering a systematic investigation on the relationship between empowerment and employee motivation within the context of banking in keeping with the important role of empowerment in a service type of organization. For purpose of comparison, questionnaires were administered to a private bank and a government owned bank in Malaysia. Results indicated differences in relationship between empowerment and employee motivation across the two banks with government owned bank reporting higher correlation compared to the private bank. Key Words: empowerment, employee motivation, banking, Malaysia Topic Groups: organizational behavior, managerial and organizational cognition and psychology, human resource management and career development INTRODUCTION The complexity of today’s business environment has prompted organizations to seek ways to improve their sustainability and competitive strength in the market. Many organizations have transformed their landscape dramatically, which has involved incorporating management strategies that utilize their employees’ fullest capabilities and potential. Empowerment is observed to be one of the management strategies that is frequently used by contemporary organizations to create an advantage over their competitors (Ahearne et al., 2005; Campbell, 2009; Chan et al., 2008; Dimitriades, 2005; Menon, 2001; Uner & Turan, 2010). The essential role of empowerment in contemporary organizations is unsurprising given the appealing benefits it brings to the organizations and their employees. Loughman et al. (2009), for example, highlights that empowerment is vital to the continuous quality ABSRJ 2(2): 141 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 improvement process in organizations. Smith (1994), on the other hand, argues that empowerment has a positive influence on employee attitudinal and behavioral responses in the workplace. In particular, many believe that an increase in employee motivation is one of the positive outcomes of empowerment (Chiang & Jang, 2008; Dee et al., 2002; Drake et al., 2007; Kappelman et al., 1996; Ueno, 2008). Some suggest that empowerment helps to satisfy employees’ self-efficacy needs and hence stimulate their intrinsic motivation (Chan et al., 2008; Spreitzer, 1995; Thomas & Velthouse, 1990). In response to the claims made regarding the positive outcomes of empowerment, many scholars have initiated empirical studies in order to support the claims made. Some of these empirical studies have supported the claims by revealing that positive outcomes, such as increased job satisfaction, improved organizational commitment, better job performance and increased competitiveness, are associated with empowerment (e.g. Dewettinck & Ameijde, 2007; Hall, 2008; Nielson & Pedersen, 2003; Spreitzer, 1995). However, it is noted that there appears to be a lack of empirical evidence for certain positive outcomes, such as employee motivation or intrinsic motivation, in particular, although there are presumed links between empowerment and these outcomes. This to some extent warrants further investigation. Due to the lucrative positive outcomes associated with empowerment, it thus can be expected that empowerment is embraced by many types of business organizations, particularly service organizations. According to Ueno (2008), the empowerment of the employees of service organizations plays a role in enhancing the level of service quality. Empowerment offers the employees of the service organizations the ability to respond promptly to the individual needs of the increasingly demanding customers and unpredictable service situations (Chebat & Kollias, 2000; He et al., 2010; Klidas, 2002). Bowen and Lawler (1992) consider employees’ increased job satisfaction, warmer and more enthusiastic interactions with customers and customer retention through word-of-mouth advertisement, the major benefits of employee empowerment for service organizations (Ergeneli et al., 2007). Despite the many investigations into empowerment in service organizations in the literature (Amenumey & Lockwood, 2008; Dee et al., 2002; Hancer & George, 2003; He et al., 2010; Holdsworth & Cartwright, 2003; Siu et al., 2005), it can be observed that only limited investigations have been made into certain types of service organizations, such as those in the banking industry. This paper basically aims to redress the existing gaps in the current literature, by carrying out a systematic investigation into empowerment in relation to employee motivation, investigating intrinsic motivation in particular, within the setting of the banking industry in Malaysia. Malaysia was selected as the context for the study in the light of the claim made by Bordin et al. (2007) concerning the dearth of investigations into empowerment in a South East Asian context. The paper evolves as follows. It first provides a literature review of the two variables investigated in the study: empowerment and motivation; the interaction between the two is then discussed. Next, a description of the methodology underpinning the study is given, which details the research design, procedures, participants, measures and statistical techniques used in the data analysis. The results of the study are then presented, followed by a discussion. The paper ends with conclusions, in which the contribution of the study to the advancement of business practice is highlighted. ABSRJ 2(2): 142 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 THEORY Empowerment The concept of empowerment has spawned diverse definitions. Ergeneli et al. (2007), for instance, highlight that there is no consensus in the literature over defining empowerment. In a similar vein, Holt et al. (2000) point out that definitions of empowerment abound, whilst Mondros and Wilson (1994) and Russ and Millam (1995) argue that empowerment is rarely defined clearly and is used rhetorically (Greasley et al., 2005, p. 355). Although a single universal definition of empowerment is still under debate, two approaches to empowerment are frequently discussed in the literature: structural and psychological. The structural approach to empowerment has been used by academics and practitioners for longer than the psychological approach. It emanates from the concept of power (Kanter, 1977) and focuses on a set of organizational policies and practices, initiated by management, with the goal of cascading decision-making down through the organizational hierarchy (Ahmad & Oranye, 2010; Biron & Bamberger, 2010). The approach also suggests that employees are empowered when they have access to information, support, resources and opportunities to learn and grow in their work setting (Armstrong & Laschinger, 2006). On the other hand, the psychological approach emphasizes the cognitive state of those employees being empowered, that is, whether or not employees perceive themselves as being empowered (Spreitzer, 1995; Thomas & Velthouse, 1990). This focuses on a psychological state encompassing the employee's perceptions of four cognitions: (1) meaning, (2) competence, (3) self-determination, and (4) impact (Conger & Kanungo, 1988; Spreitzer, 1995; Thomas & Velthouse, 1990). Meaning is desribed as the value of a work goal or purpose, judged in relation to an individual's own ideals and standards (Spreitzer, 1995). Samad (2007) describes meaning as the state in which employees feel that their work is important and care deeply about what they do, and when they consider the work goals or activivities they are engaged in to be congruent with their own value system, ideals and standards (p.256). Competence refers to an individual's belief in his or her capability to perform activities using skills (Spreitzer, 1995). It implies the confidence that individuals feel in their ability to do their work well (Holdsworth & Cartwright, 2003; Steward et al., 2010). Self-determination is concerned with an individual's autonomy in the initiation and continuation of their work behaviors and processes (Conger & Kanungo, 1988). It suggests the freedom that the individual has in deciding how to perform their job. Impact reflects the degree to which the individual can influence strategic, administrative or operating outcomes at work (Spreitzer, 1995). In other words, impact involves the degree to which an individual's work makes a difference to the success of the task and the extent to which an individual believes he or she can influence organizational outcomes (Avolio et al., 2004). Conger and Kanungo (1988) argue that management practices (i.e. the structural approach to empowerment) are only a set of conditions and that those practices may empower employees but will not necessarily do so. Subscribing to a similar thought, Siegall and Gardner (2000) highlight that the true benefits of empowerment will not be seen unless people first perceive themselves as being empowered. Empowerment is said to have occurred if the individual believes that they have been empowered, therefore, the individual cannot be empowered without the feeling that they have been (Greasley et al., 2008). Stemming from the deficiency of the structural approach in neglecting the individual experience in the empowerment process (Chan et al., 2008), in this study we have chosen the psychological approach to empowerment over the structural approach. ABSRJ 2(2): 143 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 Service organizations are said to involve a unique customer-organization relationship and empowerment is advocated as an essential approach for addressing that unique relationship (Lashley, 1999). It is believed that empowerment enables customer-contact employees to meet and satisfy ever-changing customer requirements and respond promptly to their problems and complaints (Chebat & Kollias, 2000; Klidas, 2002). Empowerment will add value not only to the employees of the service organizations, but most importantly, lead to higher service quality, which in turn results in satisfied and retained customers (Smith, 1994; Ueno, 2008). It is thus unsurprising to note that many service organizations are embracing an empowerment program as part of their strategy for delivering customer satisfaction (He et al., 2010; Hechanova et al., 2006). Empirical investigations into empowerment in service organizations appear to revolve heavily around certain types of organization. Among them are call centers (e.g. Bartram & Casimir, 2007; Carless, 2004; Holdsworth & Cartwright, 2003), hospitals (e.g. Ahmad & Oranye, 2010; Siu et al., 2005), hotels (e.g. Amenumey & Lockwood, 2008; Chiang & Jang, 2008; Salazar; 2006), education establishments (e.g. Abd. Ghani et al., 2009; Dee et al., 2002) and restaurants (e.g. Hancer & George, 2003; Lashley, 1999). However, investigations into other types of service organizations, such as those in the banking industry, seem to be lacking. Although there are studies that include organizations from the banking industry as part of a more general investigation (e.g. Hechanova et al., 2006; Özaralli, 2003), the number of investigations that focus on the banking industry, in particular, appears to be limited in the academic literature. The service organizations in the banking industry involve a massive amount of customer interaction and hence the limited number of investigations into empowerment in the banking industry signifies a gap that needs to be addressed. Motivation There has been unabated interest in employee motivation for many years. The continuing and pronounced interest in the phenomenon of motivation is heavily based on the crucial role that motivation plays in an organization. Lin (2007) identifies motivation as the key determinant of work-related behavior, while Hijazi and Mehbood (2007) highlight the importance of motivation in the workplace due to the clear positive link between employee motivation and efficiency, which in turn leads to improved organizational performance. However, it is said that motivating employees remains a crucial challenge for the contemporary organization (Park & Rainey, 2008). Motivation refers to those psychological processes that cause the arousal, direction and persistence of voluntary actions that are goal-oriented (Ramlall, 2004). A rather detailed description is provided by Robson (2005), who defines motivation as the willingness to exert high levels of effort towards organizational goals, conditioned by the ability of the effort to satisfy some individual need. There are two broad classes of motivation: (1) extrinsic and (2) intrinsic. Extrinsic motivation focuses on the goal-driven reasons, for example rewards or benefits earned when performing an activity, while intrinsic motivation indicates the pleasure and inherent satisfaction derived from a specific activity (Lin, 2007, p. 137). Aldag & Brief (1979) provide a more simplistic description of the two classes of motivation, in which the former is derived from sources outside the work, whilst the latter is derived from the nature of the work itself. Together, extrinsic and intrinsic motivations influence an individual's intentions regarding an activity and his or her actual behaviors (Lin, 2007). It is argued that intrinsic motivation plays a more critical role than extrinsic motivation in the workplace. Aldag and Brief (1979), for instance, highlight that an employee experiencing a state of intrinsic motivation tends to be committed to the job and self-fulfilled through it, whereas the extrinsically motivated employee tends to feel a lack of control over their ABSRJ 2(2): 144 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 behavior in performing their job. In addition to working in the absence of close supervision, intrinsically motivated individuals are also capable of controlling their own task accomplishment and resilience to obstacles (Bohnet & Gee, 2002; Thomas & Velthouse, 1990). Within the context of business organizations, intrinsic motivation appears to have a greater influence on guiding behavior towards the mission of the organization (Mallak & Kurstedt, 1996). Following this argument, regarding the greater importance of intrinsic motivation to an organization, we have chosen to study it over extrinsic motivation, for the purpose of this study. Empowerment and motivation Empowerment is often regarded as a way to increase employee motivation (e.g. Chiang & Jang, 2008; Dee et al., 2002; Drake et al., 2007; Klagge, 1998; Ueno, 2008). Hopkins (1995) highlights that employee empowerment will increase as the opportunities for development that are offered by empowerment increase. Garg and Rastogi (2006) argue that employees need to be psychologically empowered in order to be motivated to produce a higher level of performance. Moreover, Thomas and Velthouse (1990) posit that psychological empowerment is presumed to be the proximal cause of intrinsic motivation. Although there is empirical evidence demonstrating the link between empowerment and motivation, intrinsic motivation in particular, there are relatively few studies showing this and they are limited to certain criteria. Zhang and Bartol (2010), for example, investigate empowerment in a non-service organization, revealing a positive significant relationship between empowerment and intrinsic motivation. Hechanova et al. (2006), on the other hand, offer an examination of empowerment within the setting of service organizations, but the emphasis is placed on organizations from a broad range of service sectors, with airlines and hotel companies constituting the majority of the sample. That study reported a positive significant link between empowerment and intrinsic motivation. Gagné et al. (1997) also provide an investigation into a service organization, but the findings reveal only a moderate amount of support for a relationship between empowerment and intrinsic motivation, with only two out of the four dimensions of empowerment (meaningful and self-determination) being shown to have a positive and significant relationship with intrinsic motivation. These studies indicate the need for the current study, for two important reasons. Firstly, there have been few attempts to investigate empowerment in relation to motivation, specifically intrinsic motivation, using the banking industry as the organizational context. Secondly, the varied findings reported on the link between empowerment and intrinsic motivation within service organizations (e.g. Gagné et al., 1997; Hechanova et al., 2006) show that this relationship needs to be further investigated. The current study therefore seeks to address the aforementioned gaps, that is to further explicate the link between empowerment and motivation, namely intrinsic motivation, within the context of banking organizations. Accordingly, the following hypothesis is formulated: H1: Empowerment is significantly and positively related to intrinsic motivation. METHODS Research design The study was cross-sectional in nature; a self-administered questionnaire was employed as the data collection instrument and distributed to two local banks in Malaysia, one private and one government-owned. The selection of two banks with different structures is to allow comparison and to provide a wider representative picture of empowerment within banking ABSRJ 2(2): 145 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 organizations in Malaysia. Two versions of the questionnaire were designed, one in English and one in Malay (the national language of Malaysia). The former was administered to the private bank, whilst the latter was used for the government-owned bank, at that bank's request, since Malay is the official language used there. To ensure equivalency of meaning, a back-translation of the translated version of the questionnaire was performed (Brislin, 1980). Procedures The questionnaires were administered to the employees based at the head offices of the two participating banks. Each questionnaire was accompanied by a participation information sheet and consent form that explained the aims of the study, that participation in the study was voluntary and confidentiality issues were in adherence with the ethical guidelines applicable to the study undertaken. For the participant recruitment process, two different approaches to the sampling strategy were applied. Due to the greater accessibility granted to the researcher by the private bank, a simple random sampling strategy was employed. A rather restricted access was imposed by the government-owned bank and thus, instead, a non-random snowball sampling strategy was used for the recruitment process there. A total of 432 responses were received from the private bank but only 395 were used since, during analysis, unusable responses and extreme outliers were removed from the dataset. On the other hand, 425 responses were received from the government-owned bank, with only 392 retained for the purpose of analysis. Participants The majority of the participants in the final sample from the private bank came from two age groups: (1) 26 to 30 years and (2) 31 to 35 years. Each group contained 101 participants, meaning that these two groups combined made up 51% of the final sample from the private bank. For the government-owned bank, the majority of the final sample was from three age groups: (1) 26 to 30 years, (2) 41 to 45 years and (3) 51 to 55 years, each group containing 66 participants (therefore the total of these three groups made up 50% of the final sample from the government-owned bank). In terms of gender, there were more female than male participants in both banks (56% for the private bank and 66% for the government-owned bank). Most of participants from the private bank were in the lower management group (52% of the final sample) and for the government-owned bank, the largest group was the clerical group (43% of the final sample) with lower management being the second largest group (29% of the final sample). Measurement Empowerment was measured using a 12-item scale developed by Spreitzer (1995). The scale was composed of four subscales referring to each of the dimensions of empowerment: meaning, competence, self-determination and impact. Each subscale had three items. The items were rated using a seven-point scale, where 1 represented ‘strongly disagree’ and 7 ‘strongly agree’. The internal consistency reliability for the entire scale was found to be 0.86 for both the private bank and the government-owned bank. The four subscales were averaged to obtain a single composite measure of empowerment, with a high score indicating a high perceived level of empowerment. Intrinsic motivation was measured using the Work Preference Inventory (WPI) developed by Amabile et al. (1994). The scale had a total of 15 items with responses on a four-point scale ranging from 1 'never true' to 4 'always true', where a higher score represents a more ABSRJ 2(2): 146 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 intrinsically motivated participant. The internal consistency reliability for the entire scale was 0.78 for the private bank and 0.81 for the government-owned bank. Analysis The analysis was carried out using the Statistical Package for the Social Sciences (SPSS) version 16.0 (Pallant, 2007). Prior to the detailed analysis, a preliminary analysis was conducted to check for normality. The results of the preliminary analysis revealed that the distributions of the scores in the study were reasonably normal. To compare the empowerment scores for the private and government-owned banks, an independent samples t-test was used (Ghauri & Grønhaug, 2005). In addition to the independent samples t-test, an effect size calculation was also employed to further assess the relative magnitude of the differences between the means reported in the two banks (Tabachnick & Fidell, 2007). The same tests were also used to investigate the intrinsic motivation scores for the two banks. Meanwhile, a Pearson correlation was employed to investigate the relationship between empowerment and intrinsic motivation, that is H1 (Pallant, 2007). FINDINGS Descriptive statistics and group differences Table 1 provides the descriptive statistics for the empowerment and intrinsic motivation scores for the two banks. It shows that the private bank has a higher degree of empowerment (M=5.59, SD=0.64) than the government-owned bank (M=5.12, SD=0.77). A similar pattern is found for intrinsic motivation: the private bank was reported to have a higher degree (M=3.18, SD=0.31) than the government-owned bank (M=3.05, SD=0.37). Table 1: Descriptive statistics for empowerment and intrinsic motivation Bank Variable Mean (M) Standard deviation (SD) Empowerment 5.59 0.64 Private Intrinsic motivation 3.18 0.31 Empowerment 5.12 0.77 Government-owned Intrinsic motivation 3.05 0.37 The analysis of the independent samples t-test on the empowerment scores is depicted in Table 2 and indicates a significant difference in the empowerment scores for the private and government-owned banks; t (759.412) = 9.445, p<0.001 (two-tailed). The effect size calculation further revealed that the magnitude of the differences in the means (mean difference = 0.475, 95% CI: 0.377 to 0.574) was moderate (eta squared = 0.10). ABSRJ 2(2): 147 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 Table 2: Independent samples t-test for empowerment Levene’s test for equality of variances T-test for equality of means 95% Confidence interval of the difference F Sig. T Df Sig. (2- tailed) Mean difference Std. error difference Lower Upper Equal variances assumed 9.452 785 0.000 0.475 0.050 0.377 0.574 Empowerment Equal variances not assumed 14.152 0.000 9.445 759.412 0.000 0.475 0.050 0.377 0.574 A significant difference was also found in the intrinsic motivation scores for the two banks; t (761.961) = 5.554, p<0.001 (two-tailed) (see Table 3). A small magnitude (eta squared = 0.04) of differences in the means (mean difference = 0.135, 95% CI: 0.088 to 0.183) was reported through the effect size computation. Table 3: Independent samples t-test for intrinsic motivation Levene’s test for equality of variances T-test for equality of means 95% Confidence interval of the difference F Sig. T Df Sig. (2- tailed) Mean difference Std. error difference Lower Upper Equal variances assumed 5.557 785 0.000 0.135 0.024 0.088 0.183 Intrinsic motivation Equal variances not assumed 8.207 0.004 5.554 761.961 0.000 0.135 0.024 0.088 0.183 ABSRJ 2(2): 148 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 Hypothesis (H1) testing Based on the review of the literature, it is hypothesized that empowerment and intrinsic motivation are significantly and positively correlated. As Table 4 demonstrates, a significant positive relationship between empowerment and intrinsic motivation was found in both banks. The results were thus consistent with the hypothesis (H1) proposed in this study. In addition to the full support given to H1, the correlation analysis also revealed an intriguing finding in that there was a higher significant correlation between empowerment and intrinsic motivation for the government bank (r=0.31, p<0.01) than for the private bank (r=0.21, p<0.01), despite the descriptive statistics appearing to provide more favorable findings for the private bank than for the government-owned bank. Table 4: Correlation coefficients for empowerment and intrinsic motivation Bank No. Variable 1 2 1 Empowerment 1.00 0.21* Private 2 Intrinsic motivation 0.21* 1.00 1 Empowerment 1.00 0.31* Government- owned 2 Intrinsic motivation 0.31* 1.00 *p ≤ 0.01 DISCUSSION The findings of the study in general provide further understanding into employee empowerment in organizations. Additionally, the study suggests several specific important points. Firstly, the study shows that there is not much difference between the level of empowerment perceived by employees at the private bank and by those at the government- owned bank, despite the different organizational structures in the two. Spreitzer (1996) explained that an organic structure can lead to ambiguity and uncertainty and empowered employees still need to be reassured by clear goals, tasks and lines of responsibility. Chan et al. (2008) provide empirical support for this, finding no significant relationship between organizational characteristics and empowerment. Secondly, the study further explicates the link between empowerment and intrinsic motivation. The study supports the claims made pertaining to the positive link between empowerment and intrinsic motivation (Chan et al., 2008; Hechanova et al., 2006; Spreitzer, 1995; Thomas & Velthouse, 1990; Zhang & Bartol, 2010). The results also suggest that a higher level of empowerment will induce a higher level of intrinsic motivation in the employees. Thirdly, the study provides evidence that there is a stronger positive link between empowerment and intrinsic motivation in the government-owned bank than in the private bank. Although these findings seem surprising, they are consistent with the assertion that the organizational structure is not the only factor influencing empowerment (Chan et al., 2008; Spreitzer, 1996). Moreover, it has also been found that empowerment has been a practice in Malaysian government departments for more than a decade; circulars pertaining to the instruction of empowerment have been issued by the Malaysian government to its departments since the 1990s (Abd Ghani, et al., 2009). Finally, the study further advances academic literature through the application of the Western-influenced theory of empowerment into the non-Western setting of Malaysia and through its focus on a different type of service organization, namely in the banking industry. ABSRJ 2(2): 149 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 2 (2011), Number 2 CONCLUSION AND IMPLICATIONS This study underscores some essential implications for the advancement of business and practices, in general and within the context of banking in particular. It is imperative to note the crucial role played by empowerment on influencing the level of employee motivation, specifically intrinsic motivation, in an organization. The findings therefore should encourage organizations, particularly managers, to motivate their subordinates by empowering them. Having stated the importance of empowerment, organizations must also continuously find ways to improve their empowerment programs. With increasing challenges in the business environment, existing empowerment programs might no longer be able to address the needs of organizations. In other words, empowerment can be an effective strategy for an organization’s success only when reviews of the empowerment program are carried out in line with changes in the business environment. In conclusion, this study offers further empirical support to the investigation of empowerment within a different type of service organization and a different country setting. The study supports the proposition that there is a link between empowerment and motivation, intrinsic motivation in particular. The study also found that the link between the two was stronger in the government-owned bank than the private bank. Although the proposition of there being no relationship between organizational characteristics and empowerment is supported by previous studies, the evidence for this is limited. 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