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CHAPTER 2

LITERATURE REVIEW

2.1 LEADERSHIP OVERVIEW

It is generally accepted today that management can largely be taught to adults either

in school or on the job. It is also widely believed that leadership is much more

difficult to teach, but consensus on its exact origin stops there. Some people think that

genes and early life experiences create leaders. Others point to events later in life.

Indeed few questions have caused more heated debate over the years than: Are

leaders born or made?

A leader is someone who influences others. Leadership is a complex phenomenom

involving the leader, the followers and the situation. Perhaps the best way to begin to

understand the complexities of leadership is to see more of the ways leadership has

been defined.

Leadership researchers have defined leadership in many different ways:

The process by which an agent induces a subordinate to behave in a desire

manner.

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Directing and coordinating the work of group members.

An interpersonal relation in which others comply because they want to, not

because they have to.

The process of influencing an organized group toward accomplishing its goals.

Action that focus resources to create desirable opportunities.

Creating conditions for a team to be effective.

Getting results through others (the end of leadership) and the ability to build

cohesive, goal-oriented teams (the means of leadership). Good leaders are those

who build teams to get results across a variety of situations.

A complex form of social problems solving.

Due to resolve the contradictory challenge company finding new ways to motivate

the employees while simultaneously building employee morale, new approaches to

leadership were needed.

Achieving grand visions despite the obstacles always requires an occasional burst of

energy, the kind that certain motivational and inspirational processes can provide.

Such processes accomplish their energizing effect, not by pushing people in the right

direction, as a control mechanism often does, but by satisfying very basic human

needs: for achievement, belonging, recognition, self-esteem, a sense of control over

one‘s life and living up to one‘s ideals. These processes touch us deeply and

powerfully and elicit a most powerful response.

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According to Cox (2001), there are two basic categories of

leadership: Transactional and Transformational. The distinction between

transactional and transformational leadership was first made by Downton (1973, as

cited in Barnett, McCormick & Conners, 2001) but the idea gained little currency

until James McGregor Burns‘ (1978) work on political leaders was published.

Since the 1980s some research has been done on Transformational and Transactional

Leadership, and become a new paradigm in "the new leadership" (Bryman, 1992).

(Bass, 1985) Transformational and Transactional Leadership is not an exclusive

process and separated from one another.

In another study it was found that Transactional Leadership increasing the lasissez

faire leadership in raising the level of sales representative job satisfaction, employee

satisfaction, and performance. Transformational Leadership provides a value added

for employee satisfaction (Dubinsky, Yammario & Spamgler, 1995).

According to Dr. Sugiharto, Chairman of PT Pertamina (Persero) on his presentation

in Binus JWC School on February 14th

2015, a good leader are combination from EQ

(Emotional Quotient), IQ (Intelligent Quotient) and SQ (Spiritual Quotient). IQ

(Intelligent Quotient), a person intelligent and EQ (Emotional Quotient) is basically

the ability to recognize or sense emotions, use emotions to assists thought, understand

emotion, and the ability to manage emotions. Daniel Goleman‘s in his book

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―Emotional Intelligence‖ based on his research clearly shows that EQ is the absolute

requirement of leadership, due to:

Learn principles and practices for improvements in Self-Awareness and Self-

Management: self-confidence; self-control; adaptability; initiative.

Becoming more socially: empathetic; service orientation to others and the

organization.

Relationship Management: inspirational leadership practices; change

management; conflict resolution skills; teamwork building techniques.

Daniel Goleman, writing in ―What Makes A Leader‖, says that his findings have

shown that the most effective leaders all have a high degree of Emotional Intelligence

(EQ).

SQ can be defined as the ability to behave with wisdom and compassion, while

maintaining inner and outer peace, regardless of the situation. Wisdom and

compassion being the pillars of SQ.

Number of evidence is growing that Spiritual Intelligence (SQ), Emotional Intelligent

(EQ) and Intelligence Quotien (IQ) are in fact major factors in determining the

success of both leaders and organisations alike..

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EQ + SQ I˃Q

EQ PERFORMANCE

KNOWLEDGE & SKILLS

SQ BEHAVIOR, ATTITUDE, VALUES

IQ BELIEFS

20%

80%

Picture 2.1.1 The Leadership Skills That Every Leaders Need According Dr.

Sugiharto, Chairman of PT Pertamina (Persero)

(Source: Dr. Sugiharto, Chairman of PT Pertamina (Persero) presentation at BINUS)

Based on picture above, a good leader is an combination of EQ + SQ > IQ, which

combination, 20% of Performance, Knowledge & Skills and 80% of Character. In

other words it is a combination of Hard-skills and Soft-skills of a leader.

2.2 LEADERSHIP THEORY

2.2.1 Transformational Leadership Theory

Burns distinguished between ordinary (Transactional) leaders, who exchanged

tangible rewards for the work and loyalty of followers, and extraordinary

(Transformational) leaders who engaged with followers, focused on higher order

intrinsic needs, and raised consciousness about the significance of specific outcomes

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and new ways in which those outcomes might be achieved (Barnett, McCormick &

Conners, 2001; Cox, 2001; Gellis, 2001; Griffin, 2003; Judge & Piccolo, 2004).

The idea of Transformational Leadership was developed further by Bernard Bass,

conception of Transactional and Transformational Leadership as opposites on a

continuum. He suggested instead that they are separate concepts and that good leaders

demonstrate characteristics of both (Judge & Piccolo, 2004, p. 755).

Transformational Leadership is a style of leadership where the leader is charged with

identifying the needed change, creating a vision to guide the change through

inspiration, and executing the change in tandem with committed members of the

group. It also serves to enhance the motivation, morale, and job performance of

followers through a variety of mechanisms; these include connecting the follower's

sense of identity and self to the project and the collective identity of the organization;

being a role model for followers in order to inspire them and raise their interest in the

project; challenging followers to take greater ownership for their work, and

understanding the strengths and weaknesses of followers, allowing the leader to align

followers with tasks that enhance their performance.

According to Bass, Transformational Leadership encompasses several different

aspects, including:

Emphasizing intrinsic motivation and positive development of followers

Raising awareness of moral standards

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Highlighting important priorities

Fostering higher moral maturity in followers

Creating an ethical climate (share values, high ethical standards)

Encouraging followers to look beyond self-interests to the common good

Promoting cooperation and harmony

Using authentic, consistent means

Using persuasive appeals based on reason

Providing individual coaching and mentoring for followers

Appealing to the ideals of followers

Allowing freedom of choice for followers

Transformational leadership is that which; facilitates a redefinition of a people‘s

mission and vision, a renewal of their commitment and the restructuring of their

systems for goal accomplishment. It is a relationship of mutual stimulation and

elevation that converts followers into leaders and may convert leaders into moral

agents. Hence, transformational leadership must be grounded in moral foundations

(Leithwood, as cited in Cashin et al., 2000, p.1).

Transformational leadership fosters capacity development and brings higher levels of

personal commitment amongst ‗followers‘ to organizational objectives. According to

Bass (1990b, p. 21) transformational leadership ―occurs when leaders broaden and

elevate the interests of their employees, when they generate awareness and

acceptance of the purposes and mission of the group, and when they stir employees to

look beyond their own self-interest for the good of the group.‖ Together, heightened

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capacity and commitment are held to lead to additional effort and greater productivity

(Barbuto, 2005; Leithwood & Jantzi, 2000; Spreitzer, Perttula & Xin, 2005).

Transformational leaders elevate people from low levels of need, focussed on

survival (following Maslow‟s hierarchy), to higher levels (Kelly, 2003; Yukl, 1989).

They may also motivate followers to transcend their own interests for some other

collective purpose (Feinberg, Ostroff & Burke, 2005, p. 471) but typically help

followers satisfy as many of their individual human needs as possible, appealing

notably to higher order needs (e.g. to love, to learn, and to leave a legacy).

Transformational leaders are said to engender trust, admiration, loyalty and respect

amongst their followers (Barbuto, 2005, p. 28). This form of leadership requires that

leaders engage with followers as ‗whole‘ people, rather than simply as an ‗employee‘

for example. In effect, transformational leaders emphasize the actualization of

followers (Rice, 1993).

Transformational leadership is also based on self-reflective changing of values and

beliefs by the leader and their followers. From this emerges a key characteristic of

transformational leadership. It is said to involve leaders and followers raising one

another‘s achievements, morality and motivations to levels that might otherwise have

been impossible (Barnett, 2003; Chekwa, 2001; Crawford, Gould & Scott, 2003;

Southwest Educational Development Laboratory, 2004).

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Most leaders think very little about their own leadership style. They "do what comes

naturally" when leadership is needed. If they are successful leaders, their instincts

usually serve them well. To develop leadership ability, leaders need to be more

aware of how they lead.

We all have an image of a leader. It can be described by such words as intelligent,

courageous, persuasive, skilful, and powerful. You may have heard the myth that

―Leaders are Born, Not Made!‖ However, numerous leadership studies and programs

have shown that individuals with a desire to do so can take steps to learn, practice and

improve their leadership capabilities and develop into leaders. The ability to lead

effectively is based on a number of key skills. These skills are highly sought after by

employers as they involve dealing with people in such a way as to motivate, enthuse

and build respect.

As a leader there are seven basic principles that a leader should have in order to

create a synergy among others (rees, 2001):

1. Simplication

Under the principle of simplification, the transformational leader speaks in a

clear and practical manner while articulating the direction the team is heading.

Specifically, the plan for each project should include more than what needs to

be done at the moment. The desired end result should also be vividly

communicated so employees know where they, and the project, are heading. By

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knowing and effectively relaying what the project needs to transform into the

anticipated result, you eliminate miscommunication and misunderstanding.

2. Motivation

Employees need motivation to perform at their best. Under the principle of

motivation, you gain the agreement and commitment necessary to elevate your

vision. By understanding your employees‘ likes and dislikes, you know what

motivates and what doesn‘t. For example, recognizing and applauding their

accomplishments, providing training to increase their knowledge base,

establishing a pleasant work environment, giving half-days off for performing

above expectations, or providing weekly snacks such as bagels or donuts, can

motivate employees into performing at their highest level

3. Facilitation

The principle of facilitation requires you to provide your employees with the

proper learning tools to elevate the vision to its greatest height. Specifically,

workers need stimulating work that challenges and expands their minds and

facilitates the desire to keep learning. As a transformational leader, you

recognize this principle and work toward improving your employees‘

intellectuality.

4. Innovation

Change in a business environment is inevitable. Under the principle of

innovation, you courageously recognize the need for change and initiate it

accordingly. For example, innovation may include learning and adapting to an

upgraded accounting system, or adjusting to an employee who has just been

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promoted to management. As a transformational leader, you effectively show

employees why the change is needed, how it will benefit them and the

company, and how to embrace it.

5. Mobilization

You need the right people to elevate your vision. Transformational leaders

know how to assemble the appropriate team to get the job done. This includes

enlisting, empowering and equipping qualified team leaders and other willing

participants who do not have leadership roles. The transformational leader

understands the importance of assigning tasks based on participants‘

characteristics and abilities.

6. Preparation

The principle of preparation requires transformational leaders to be infinite

students. You must have the introspective ability to keep learning about

yourself, alone or with the assistance of others. To maintain a flourishing bond

with your employees, you must always be prepared to nurture and support the

relationship. This means looking outside yourself, concentrating on what‘s best

for the team, and transferring this energy to your employees so they emulate

this behavior.

7. Determination

Determination means having the tenacity to finish the race regardless of the

hurdles that come your way. The principle of determination requires you to

depend on your courage, stamina, strength and perseverance to realize your

vision. By displaying endurance, you show employees that hard work pays off

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in the end. In business, a vision is a realistic, convincing and attractive

depiction of where you want to be in the future. Vision provides direction, sets

priorities, and provides a marker, so that you can tell that you've achieved what

you wanted to achieve.

2.2.2 Transformational Leadership Behavior

A transformational leader goes beyond managing day-to-day operations and crafts

strategies for taking his company, department or work team to the next level of

performance and success. Transformational leadership styles focus on team-building,

motivation and collaboration with employees at different levels of an organization to

accomplish change for the better. Transformational leaders set goals and incentives to

push their subordinates to higher performance levels, while providing opportunities

for personal and professional growth for each employee.

Transformational leadership fosters capacity development and brings higher levels of

personal commitment amongst ‗followers‘ to organizational objectives. According to

Bass (1990b, p. 21) transformational leadership ―occurs when leaders broaden and

elevate the interests of their employees, when they generate awareness and

acceptance of the purposes and mission of the group, and when they stir employees to

look beyond their own self-interest for the good of the group.‖ Together, heightened

capacity and commitment are held to lead to additional effort and greater productivity

(Barbuto, 2005; Leithwood & Jantzi, 2000; Spreitzer, Perttula & Xin, 2005).

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According to the James McGregor Burns in his 1978 book, Leadership, the idea

of Transformational Leadership, an effective leader is a person who does the

following:

1. Creates an inspiring vision of the future.

A compelling vision provides the foundation for leadership. But it's leaders'

ability to motivate and inspire people that helps them deliver that vision. What's

particularly helpful here is where leaders have expert power. People admire and

believe in these leaders because they are expert in what they do. They have

credibility, and they've earned the right to ask people to listen to them and

follow them. This makes it much easier for these leaders to motivate and inspire

the people they lead. Leaders can also motivate and influence people through

their natural charisma and appeal, and through other source of power, however,

good leaders don't rely too much on these types of power to motivate and

inspire others.

2. Motivates and inspires people to engage with that vision.

Determination also needed to create a vision, leaders focus on an

organization's strengths by using tools such as Porter‘s Five Forces, Core

Competence Analysis, VRIO Analysis and SWOT Analysis to analyze their

current situation. They think about how their industry is likely to evolve, and

how their competitors are likely to behave. They look at how they can innovate

successflly, and shape their businesses and their strategies to succeed in future

marketplaces. And they test their visions with appropriate market research, and

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by assessing key risks using techniques such as Scenario Analysis. Therefore,

leadership is proactive – problem solving, looking ahead, and not being

satisfied with things as they are, dynamic instead of static. Once they have

developed their visions, leaders must make them compelling and convincing.

A compeling visison is one that people can see, feel, understand, and embrace.

Effective leaders provide a rich picture of what the future will look like when

their visions have been realized. They tell inspiring stories, and explain their

visions in ways that everyone can relate to. Here, leadership combines the

analytical side of vision creation with the passion of company‘s shared values,

creating something really meaningful to the people being led.

3. Manages delivery of the vision.

According to the Hersey-Blanchard Situational Leadership Model, there is a

time to tell, a time to sell, a time to participate, and a time to delegate. Knowing

which approach you need to use, and when you need it, is key to effective

leadership. Leaders must ensure that the work needed to deliver the vision is

properly managed – either by themselves, or by a dedicated manager or team of

managers to whom the leader delegates this responsibility – and they need to

ensure that their vision is delivered successfully. Leaders also need to make

sure they manage change effectively. This helps to ensure that the changes

needed to deliver the vision are implemented smoothly and thoroughly, with the

support and backing of the people affected.

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4. Coaches and builds a team, so that it is more effective at achieving the vision.

Individual and team development are important activities carried out by

transformational leaders. To develop a team, leaders must first understand

team dynamics. A leader will then ensure that team members have the

necessary skills and abilities to do their job and achieve the vision. They do

this by giving and receiving feedback regularly, and by training and coaching

people to improve individual and team performance. Leadership also includes

looking for leadership potential in others. By developing leadership skills

within your team, you create an environment where you can continue success

in the long term. And that's a true measure of great leadership.

Transformational leaders fit well in leading and working with complex work

groups and organizations, where beyond seeking an inspirational leader to

help guide them through an uncertain environment, followers are also

challenged and feel empowered; this nurtures them into becoming loyal, high

performers.

There are 4 components to transformational leadership (Barbuto (2005); Hall,

Johnson, Wysocki & Kepner (2002); Judge & Piccolo, 2004; Kelly (2003); Simic

(1998)), sometimes referred to as the 4 I's:

Idealized Influence (II) - the leader serves as an ideal role model for followers;

the leader "walks the talk," and is admired for this. Charismatic vision and

behaviour that inspires others to follow.

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Inspirational Motivation (IM) - Transformational leaders have the ability to

inspire and motivate followers. Combined these first two I's are what constitute

the transformational leader's charisma. Capacity to motivate others to commit to

the vision.

Individualized Consideration (IC) - Transformational leaders demonstrate

genuine concern for the needs and feelings of followers. This personal attention

to each follower is a key element in bringing out their very best efforts.

Coaching to the specific needs of followers.

Intellectual Stimulation (IS) - the leader challenges followers to be innovative

and creative. A common misunderstanding is that transformational leaders are

"soft," but the truth is that they constantly challenge followers to higher levels

of performance. Encouraging innovation and creativity.

Nevertheless, it is clear that general understandings of transformational leadership are

dominated by acceptance of the four dimensions set out above. These factors have

been confirmed by empirical work in the area (Bass, Avolio, Jung & Berson, 2003, p.

208).

2.2.3 Transactional Leadership Theory

The transactional leader, a concept introduced by Max Weber in 1947 and then

reiterated by Bernard Bass in 1981. Transactional Leadership, also known as

managerial leadership, focuses on the role of supervision, organization, and group

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performance; transactional leadership is a style of leadership in which the leader

promotes compliance of his/her followers through both rewards and punishments.

Unlike transformational leadership, leaders using the transactional approach are not

looking to change the future, they are looking to merely keep things the same.

Leaders using transactional leadership as a model pay attention to followers' work in

order to find faults and deviations. A simple assumption about Transactional

Leadership:

People are motivated by reward and punishment.

Social systems work best with a clear chain of command.

When people have agreed to do a job, a part of the deal is that they cede all

authority to their manager.

The prime purpose of a subordinate is to do what their manager tells them to

do.

The transactional leader works through creating clear structures whereby it is clear

what is required of their subordinates, and the rewards that they get for following

orders. Punishments are not always mentioned, but they are also well-understood and

formal systems of discipline are usually in place.

The early stage of Transactional Leadership is in negotiating the contract whereby the

subordinate is given a salary and other benefits, and the company (and by implication

the subordinate's manager) gets authority over the subordinate. When the

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Transactional Leader allocates work to a subordinate, they are considered to be fully

responsible for it, whether or not they have the resources or capability to carry it out.

When things go wrong, then the subordinate is considered to be personally at fault,

and is punished for their failure (just as they are rewarded for succeeding).

The transactional leader often uses management by exception, working on the

principle that if something is operating to defined (and hence expected) performance

then it does not need attention. Exceptions to expectation require praise and reward

for exceeding expectation, whilst some kind of corrective action is applied for

performance below expectation.

Whereas Transformational Leadership has more of a 'selling' style, Transactional

Leadership, once the contract is in place, takes a 'telling' style. A person who is

largely motivated by money and simple reward, and hence whose behavior is

predictable.

In practice, there is sufficient truth in Behaviorism to sustain Transactional

approaches. This is reinforced by the supply-and-demand situation of much

employment, coupled with the effects of deeper needs, as in Maslow‘s Hierarchy.

When the demand for a skill outstrips the supply, then Transactional Leadership often

is insufficient, and other approaches are more effective in other words it is situational.

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2.2.4 Transactional Leadership Behavior

This type of leadership is effective in crisis and emergency situations, as well as for

projects that need to be carried out in a specific way. Transactional leaders are

expected to do the following:

"Set goals, articulate explicit agreements regarding what the leader expects

from organizational members and how they will be rewarded for their efforts

and commitment, and provide constructive feedback to keep everybody on

task" (Vera & Crossan, 2004, p. 224).

Transactional leaders focus on increasing the efficiency of established routines

and procedures and are more concerned with following existing rules than with

making changes to the structure of the organization.

Thus, they operate most effectively in organizations that have evolved beyond

the chaotic, no-rules stage of entrepreneurial development that characterizes so

many new companies.

Transactional leadership establishes and standardizes practices that will help the

organization reach maturity, emphasizing setting of goals, efficiency of

operation, and increase of productivity".

Within the context of Maslow‟s hierarchy of needs, transactional leadership works

at the basic levels of need satisfaction, where transactional leaders focus on the lower

levels of the hierarchy. Transactional leaders use an exchange model, with rewards

being given for good work or positive outcomes. Conversely, people with this

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leadership style also can punish poor work or negative outcomes, until the problem is

corrected. One way that transactional leadership focuses on lower level needs is by

stressing specific task performance. Transactional leaders are effective in getting

specific tasks completed by managing each portion individually.

Transactional Contingent reward has a positive relationship to the employee with

commitment, satisfaction and performance (Goodwin, Wofford, and Whittington,

2001). Transactional leaders are concerned with processes rather than forward-

thinking ideas. These types of leaders focus on contingent reward (also known as

contingent positive reinforcement) or contingent penalization (also known as

contingent negative reinforcement).

Contingent rewards (such as praise) are given when the set goals are accomplished

on-time, ahead of time, or to keep subordinates working at a good pace at different

times throughout completion. Contingent punishments (such as suspensions) are

given when performance quality or quantity falls below production standards or goals

and tasks are not met at all. Often, contingent punishments are handed down on a

management-by-exception basis, in which the exception is something going wrong.

Within management-by-exception, there are active and passive routes.

For example, when you start a new project, you will probably have lots of enthusiasm

for it, so it's often easy to win support for the project at the beginning. However, it

can be difficult to find ways to keep your vision inspiring after the initial enthusiasm

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fades, especially if the team or organization needs to make significant changes in the

way that they do things. Leaders recognize this, and they work hard throughout the

project to connect their vision with people's individual needs, goals, and aspirations.

One of the key ways they do this is through Expectancy Theory. Effective leaders

link together two different expectations:

1. The expectation that hard work leads to good results.

2. The expectation that good results lead to attractive rewards or incentives.

This motivates people to work hard to achieve success, because they expect to enjoy

rewards – both intrinsic and extrinsic – as a result. Other approaches include restating

the vision in terms of the benefits it will bring to the team's customers, and taking

frequent opportunities to communicate the vision in an attractive and engaging way.

Active management-by-exception means that the leader continually looks at each

subordinate's performance and makes changes to the subordinate's work to make

corrections throughout the process.

Passive management-by-exception leaders wait for issues to come up before fixing

the problems. Laissez-faire; The leader provides an environment where the

subordinates get many opportunities to make decisions. The leader himself abdicates

responsibilities and avoids making decisions and therefore the group often lacks

direction. With transactional leadership being applied to the lower-level needs and

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being more managerial in style, it is a foundation for transformational leadership

which applies to higher-level needs.

2.3 EMPLOYEES SATISFACTION THEORY

An engaged employee is a person who is fully involved in, and enthusiastic about, his

or her work. In his book, Getting Engaged: The New Workplace Loyalty, author Tim

Rutledge explains that truly engaged employees are attracted to, and inspired by, their

work (―I want to do this‖), committed (―I am dedicated to the success of what I am

doing‖), and fascinated (―I love what I am doing‖). Satisfied employees care about

the future of the company and are willing to invest the discretionary effort, see the

organization succeeds because they believe that their succeeds lies in their company‘s

succeeds.

As shown in the picture follow, the Maslow‘s Hierarchy of Needs that shown the

directly influences of the famous Maslow‘s theory with Employee Engagement.

Maslow argued in his theory that individuals needed to satisfy their basic needs such

as warmth, safety and security in order to then realize their own personal growth and

development.

The same theory can be applied to how an organization treats and engages with their

employees. For many people the basic needs of a job are that the salary, especially if

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we see blue-color worker, the paycheck that allows them to pay the bills and live a

lifestyle they have become accustomed to. Having a sense of financial independence

is innate in almost all of us with very few people brave enough to run a risk and

disregard monetary reward in favor of other factors. For many of us this is

SURVIVAL.

Picture 2.3.1 The Maslow‟s Hierarchy of Needs Applied to Employees

Satisfaction or Engagement

(Source: Toward a Psychology of Being – Abraham H. Maslow)

Next come a sense of stability and what is commonly known as job SECURITY.

Given the volatile nature of the job market, most people fear the thought of losing

their job and the prospect of having to join the unemployment line. Whilst the

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concept of a ‗job for life‘ is all but dead, people generally crave security and

structure in the workplace – and much like salary would put this above other aspects

of a job for some people. Many larger employers have no issues satisfying those

needs, especially when it comes to higher level positions. A big company recognizes

the importance of attracting the best talent. But what do you do once you have them?

This is where Maslow‘s needs theory really comes into play.

The next level in the needs hierarchy is a sense of BELONGING and holding trust

and acceptance within a group. Organizational structures generally follow a team

principle so creating a sense of camaraderie should just come naturally. Employees

need to feel like they are part of something bigger but that they are also valued and

their contribution is valuable to the business. This can only be achieved by instilling

those beliefs from the top-down whilst also creating a sense of parity between staff

and senior management. This leads us on to the thing that really enables individuals

to engage with their job and the company they work for – a sense that their

contribution is IMPORTANT.

This feeling of significance, especially within a large company is absolutely vital if a

member of staff is going to feel any real affinity and advocacy towards their

paymasters. If you make your staff feel as though they are integral to the company‘s

values and goals then that‘s when you have reached the high engagement you will be

expecting only rising company‘s share prices and financial performance. To achieve

this employer or a leaders have to displaying a genuine concern and interest in their

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staff‘s progression and development within the company. When employees have

access to opportunities this is meeting their SELF-ACTUALISATION needs and

will enable employees to be highly successful and become an asset to the

organization, inspiring others along the way. Simple summary from above Maslow‘s

theory would be ―employees can provide the pathway to profits and growth.

While according to Robbins (2001) job satisfaction is defined as a person's general

attitude towards their work. This definition contains broad understanding. In other

words, job satisfaction is a complex summation of a number of elements of the work

that distinguished and separated from each other (job discrete elements).

If referring to George & Jones (2002), a collection of job satisfaction and beliefs

people feelings about the job. Others believe it is not so simplistic as this definition

suggests and instead that multidimensional psychological responses to one's job are

involved. Researchers have also noted that job satisfaction measures vary in the

extent to which they measure feelings about the job (affective job satisfaction) or

cognitions about the job (cognitive job satisfaction). Disclosure of employee

dissatisfaction can be delivered in four ways:

1. Voice Response (active and constructive, giving advice).

2. Response Loyalty (passive: do not do anything / constructive: expectations of

improved conditions).

3. Response neglect (passive: do not want to know / destructive: let conditions

deteriorate)

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4. Response Exit (destructive: employee exit / active: looking for a new job)

Howell and Dipboye (1986) sees Employee Satisfaction overall as the degree

satisfaction of employees likes and dislikes on various aspects of the job. In other

words, job satisfaction reflects employee‘s attitude towards work. (Munandar, 2001).

Satisfaction is generally considered the difference between what is expected or

desired compared to what is actually experienced across a number of disciplines

(Festinger 1942; 1954).

2.3.1 Discrepancy Theory

John Locke (1969) ―Job satisfaction is the perceived difference between what a

person actually receives and what he wants to receive‖. However level of aspiration

is not measure in this theory. The expectation of an individual are the real measure of

his job satisfaction in this theory. A discrepancy is a perceived difference between an

adopted anchor and a personal understanding of accomplishment along the same

dimension (Locke 1969; Oliver 1981). The anchor can be set by social pressure,

established employment goals, personal expectations, threshold requirements, free

markets, or any agency or existing bias (Micholas 1985).

The perceived discrepancy can result in a number of reactions that are emotive or

active, including an adjustment or dismissal of the anchor, a change in the perception

of accomplishment, or a resulting belief that leads to a particular attitude or action.

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2.3.2 Affect Theory

Edwin A. Locker‘s Range of Affect Theory (1976) is arguably the most famous job

satisfaction model. The main premise of this theory is that satisfaction is determined

by a discrepancy between what one wants in a job and what one has in a job. Further,

the theory states that how much one values a given facet of work moderates how

satisfied/dissatisfied employees becomes when expectations are/aren‘t met. When a

person values a particular facet of a job, his satisfaction is more greatly impacted both

positively (when expectations are met) and negatively (when expectations are not

met), compared to one who doesn‘t value that facet.

2.3.3 Maslow’s Hierarchy of Needs

Maslow's hierarchy of needs is a it‘s known as "A Theory of Human Motivation".

Each need in the hierarchy are interrelated rather than sharply separated. The pyramid

contains what Maslow called "deficiency needs" or "d-needs" the most fundamental

in the four layers of the pyramid. Maslow devides the needs into:

1. Physiological needs

Physiological needs are the physical requirements for human survival or the

essential needs, indeed very important. If these requirements are not met, the

human body cannot function properly and will ultimately fail. Such as air,

water and food.

2. Safety needs

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It‘s a feeling for being safe or other words with their physical needs relatively

satisfied, the individual's safety needs take precedence and dominate behavior.

This needs include:

Personal security

Financial security

Health and well-being

Safety net against accidents/illness and their adverse impacts

3. Love and belonging

The sense of belonging and acceptance feeling among their social groups,

regardless whether these groups are large or small. Humans need to love and be

loved – both sexually and non-sexually – by others. This need for belonging

may overcome the physiological and security needs, depending on the strength

of the peer pressure.

4. Esteem

The need to feel respected; includes the need to have self-esteem and self-

respect. Esteem presents the typical human desire to be accepted and valued by

others. In other words recognition. Maslow devides this need into two:

1. Higher version

The "higher" version manifests itself as the need for self-respect. Such as

strength, competence, mastery, self-confidence, independence, and

freedom. This "higher" version takes precedence over the "lower" version

because it relies on an inner competence established through experience.

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2. Lower version

The "lower" version of esteem is the need for respect from others. This

may include a need for status, recognition, fame, prestige, and attention.

5. Self-actualization

This level of need refers to what a person's full potential is and the realization

of that potential. Maslow describes this level as the desire to accomplish

everything that one can, to become the most that one can be. Individuals may

perceive or focus on this need very specifically.

Employees have the need to satisfy the needs hierarchy at different levels. Employee

contracts (laborer) more orientated on meeting survival needs (physiological),

whereas a person who has more skills and knowledge seek satisfaction in the

fulfillment of self-realization. A person who has had enough on wages earned

(physiology) then he will try to satisfy higher needs.

However the human mind and brain are complex and there‘s no similarity between

each individuals, the complexity of brain may inflict different motivations from

various levels of Maslow's hierarchy occur at the same time. In addition to the three

requirements above, this theory also explains that the individual needs to start from

the first requirement. However, these needs can occur simultaneously. For the clear

picture, we can see from the Maslow‘s Hierachy picture as follow:

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Picture 2.3.3.1 Maslow‟s Hierarchy of Needs

(Source: Toward a Psychology of Being – Abraham H. Maslow)

2.3.4 ERG Theory (Existence – Relatednes - Growth)

ERG theory argues that there are three groups of basic needs, namely the need for

Existence, Relatedness and Growth. Requirement is the existence of basic material

needs to remain. These needs are physiological and safety needs such as Maslow.

Interconnected needs is another individual desires. These needs include social needs

and awards. While the need for growth is intrinsic desire for personal development.

These needs include the needs of Maslow's self-actualization and intrinsic part of

self-esteem.

In addition to the three requirements above, this theory also explains that the

individual needs doesn‘t have to start from the first requirement. However, these

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needs can occur simultaneously. If the satisfaction of the higher needs are disturbed,

then the lower needs will pushed to reach the level of satisfaction. Application of the

motivation process is, a manager must know all the third needs and tried to balance

the needs of all three requirements. So the staff can develop motivation in work.

2.3.5. Herzberg’s Theory (Two Factor Theory)

He argued that there were certain factors that a business could introduce that would

directly motivate employees to work harder (motivators). However there were also

factors that would de-motivate an employee if not present but would not in

themselves actually motivate employees to work harder (hygiene factors)

Motivators are more concerned with the actual job itself. Hygiene factors are factors

which ―surround the job‖ rather than the job itself. Herzberg believed that businesses

should motivate employees by adopting a democratic approach to management and

by improving the nature and content of the actual job through certain methods.

Factors in Determining the Satisfaction:

a. Intrinsic factor:

1. Achievements and Recognition

Employees Placement accordance employees talents will encourage

employees to work well. And this will have a positive impact on

institutions with increased productivity. But the reward system should

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also be developed considering employee also requires recognition for

they achievements (Hezberg.1992).

2. Responsibility

Workers will be satisfied if it can carry out duties in accordance with the

responsibilities assigned or even exceeded (Gibson, 1985).

3. Advancement and the possibility of developing

Rewards or recognition such as career path to employees it is needed

because it can improving the employees status or level of work. If

possible can be given the opportunity to participate in further education. It

would increase their value and improve the professionalism of employees

(Hezberg, 1993).

4. Skills diversity

A wide variety of skills to do the job it is necessary. The more variety of

skills used, the less tedious the work (Gibson, 1985).

5. The meaning work (Work Itself)

If employees felt that the task is important and meaningful they dedicated

or provide an important contribution to job satisfaction (Herzberg 1993).

6. Autonomy

The work that gives employees freedom in terms of decision making, lack

dependent and opportunity to make decisions more quickly will cause job

satisfaction and empowerment for employees.

b. Extrinsic factors

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1. Salary or Fair wage

Money has different meanings to different people. For some money can

be a symbol of achievement, success and recognition / awards. The

amount of salary earned significantly represent the freedom to do what

you want to do. If deemed salary is too low, the workforce will feel

dissatisfied and the other way around (Munandar, 2001).

2. Relations among employees

The greatest level of job satisfaction is when there is harmonies or

positive relationship among super-ordinate and sub-ordinate or horizontal

relationships between colleagues.

3. Supporting peers

Whenever employees needed to work as a team, if they have peers who

supportive than their job satisfaction can arise and it will motivated

employees.

4. Supporting working environment

Environment playing an important roles in one organization, according to

Munandar (2001), office environment such as office lay out, lighting, etc

that make people uncomfortable will effecting their working

performance.

5. Procedure and company policies

Company administration systems and policies that easy to understand by

employees can motivated employees to be dedicated in their work, full

responsibility without feeling insatiability.

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6. Supervision quality

It is important for supervisor to implemen their best performed according

their skills, and playing fair role among others, making judgment in the

most manners and fair as possible, instead of looking for weaknesses and

mistakes their employees. Since they are the sub-ordinate role model, so

giving an good example is needed, as JF Kennedy said, Practice what you

preach