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The development and empiricalvalidation of the Employee SatisfactionIndex modelSheng-Hsun Hsu a & Yu-Che Wang aa Department of Business Administration , Chung-Hua University,Hsinchu , Taiwan, Republic of ChinaPublished online: 01 Apr 2008.
To cite this article: Sheng-Hsun Hsu & Yu-Che Wang (2008) The development and empiricalvalidation of the Employee Satisfaction Index model, Total Quality Management & BusinessExcellence, 19:4, 353-366, DOI: 10.1080/14783360701595052
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The development and empiricalvalidation of the Employee SatisfactionIndex model
Sheng-Hsun Hsu and Yu-Che Wang�
Department of Business Administration, Chung-Hua University, Hsinchu, Taiwan, Republic of China
‘People are the most important asset of any organisation’ is a highly over-used and under-believedstatement. We spend an inordinate amount of time and energy focusing on customer experience,without giving thought to employee satisfaction. Yet employee satisfaction is paramount, becauseit will determine the success or failure of what the customer experiences. This study proposesan Employee Satisfaction Index (ESI) model with an aim of simplicity, diagnostics andcomparability that can explore the causal relationship of employee satisfaction. We surveyed 132employees working for a high-tech firm. High-tech firms often find themselves operating inbusiness environments fraught with unprecedented, unparalleled, unrelenting, and largelyunpredictable change. Therefore, a company’s success depends on its ability to attract andcontinually motivate their employees to contribute their knowledge. Partial Least Squares (PLS)was used to test the theoretical model and to derive an ESI score.
Keywords: Employee Satisfaction Index; Partial Least Squares (PLS)
Introduction
It has been claimed that with product life-cycles shortening and technologies becoming increas-
ingly imitable, organisational knowledge emerges as a major source of competitive advantage.
The foundation of the new economy is knowledge and it is people who ‘develop, carry, react to,
and modify ideas’ (Van de Ven, 1986, p. 592). Firms with highly skilled and knowledgeable
employees are more likely to create knowledge and make correct decisions, hence resulting
in better organisational performance (Hitt et al., 2001; Pfeffer, 1994). However, a primary
dilemma facing organisations is how to encourage employees to contribute their knowledge
for organisational gains. Because knowledge creation is primarily a human brain activity, it is
an intangible that can neither be supervised nor forced out of people. Knowledge creation
Total Quality Management
Vol. 19, No. 4, April 2008, 353–366
�Corresponding author. Email: [email protected]
1478-3363 print/1478-3371 online# 2008 Taylor & FrancisDOI: 10.1080/14783360701595052http://www.informaworld.com
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occurs only when people voluntarily cooperate. Thus, it is necessary for organisations to under-
stand the inner force that drives employees’ behaviour to contribute knowledge.
Researchers have found that satisfied employees (e.g. having a pleasurable feeling resulting
from job experience) are more likely to contribute their knowledge (Janz & Prasarnphanich,
2003), improve their job performance (Judge et al., 2001), be creative and cooperate with
others because satisfaction is the inner force that drives employees’ behaviour. In the TQM lit-
erature, it is argued that satisfied employees are highly motivated, have good work morale, and
work more effectively and efficiently. Moreover, satisfied employees are more committed to
continuous improvement and quality (Matzler et al., 2004). Dissatisfied employees, in contrast,
often hold what they know and are unwilling to share their knowledge. Because organisational
agility requires that employees at all levels engage in knowledge-based activities, understanding
why dissatisfaction occurs, the expectations and requirements of your employees, and the direc-
tions to implement changes are essential for every organisation (Eskildsen & Nussler, 2000;
Martensen & Gronholdt, 2001). By doing so, organisations enhance their capabilities to meet
increasingly turbulent and uncertain environmental conditions. However, to date, many compa-
nies do not have a realistic grasp of what their employees actually think. One of the reasons is
the lack of a scientific method to measure employee satisfaction (Rucci et al., 1998). Most of the
satisfaction literature concerns how personal characteristics (Bartel, 1981; Bedeian et al., 1992;
Clark, 1997; Wright & Hamilton, 1978), how job level (Robie et al., 1998) how education level
(Clark & Oswald, 1996) or how wage level (Clark & Oswald, 1996) affect job satisfaction, and
how job satisfaction affects employee behaviours (e.g. increase productivity, organisational
commitment, lower absenteeism and turnover). However, few studies have been done to
provide a managerial tool to measure employee satisfaction and examine the issue as a
whole. To fill this void, we propose an Employee Satisfaction Index (ESI) model with an
aim of simplicity, diagnostics and comparability that can explore the causal relationship of
employee satisfaction.
Schonberger’s (1990) emphasis on internal customer relationships provides support for the
idea that employees may be viewed as the ‘customer’ of the company. Viewing employees as
a firm’s internal customers, we can benefit from the past studies of Customer Satisfaction
Index (CSI) by incorporating key concepts into the ESI model. CSI is a model to measure the
cause-and-effect relationships between satisfaction and loyalty (Fornell et al., 1996). Research-
ers have shown CSI can serve as a predictor for companies’ profitability (Anderson et al., 1994,
1997; Eklof et al., 1999) and market value (Eklof et al., 1999; Ittner & Larcker, 1996).
We surveyed 132 employees working for a high-tech firm. High-tech firms often find
themselves operating in business environments fraught with unprecedented, unparalleled, unre-
lenting, and largely unpredictable change. Therefore, a company’s success depends on its
ability to attract and continually motivate its employees to contribute their knowledge.
Partial Least Squares (PLS) was used to test the theoretical model and to derive the ESI
score. Compared with covariance-based structural equation model techniques (e.g. LISREL),
PLS is more appropriate to use when the theoretical model is prediction-oriented in nature
(Fornell, 1982). Besides, PLS is shown to deal with multicollinearity, manifest skewness and
misspecification of inner and outer structures in a reasonably robust way (Cassel et al., 1999;
Hsu et al., 2006).
The organisation of this study is as follows. In the next section, we propose an ESI model. In
the section after, how a sample is derived and the definitions of measures are given. In the fourth
section, to demonstrate the model’s applicability, we analyse its results. Finally, we conclude
with a discussion.
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Employee Satisfaction Index model
Some job satisfaction research demonstrates that employees generally want stable employment,
opportunities for promotion and satisfactory compensation (Clark & Oswald, 1996; DeSantis &
Durst, 1996). Other research shows that social satisfaction and the characteristics of superiors
have an affect on employees’ satisfaction levels (Eskildsen & Nussler, 2000; Martensen &
Gronholdt, 2001). To sum up, these studies support the idea that job satisfaction is influenced
by various factors. We suggest that job satisfaction mediates the relation between working con-
ditions on the one hand and individual outcomes on the other hand (see Figure 1). The reasoning
behind this is that there will be no behavioural effect without an intervening psychological
response. Any changes within an organisation will not affect the behaviour of the employee
without being processed mentally by the employee (Eskildsen et al., 2004).
ESI consequences
Most research believes employee satisfaction affects employee behaviour (e.g. increases pro-
ductivity and organisational commitment, lowers absenteeism and turnover). Satisfied
workers tend to engage in organisational citizenship behaviour – altruistic behaviour that
exceeds the formal requirements of their jobs (Schnake, 1991).
Employee satisfaction and loyalty
The benefits of long-term employees are that they are able to form personal relationships with
customers and other employees to understand their needs, because relationships are not built
overnight. Higher retention of employees creates a stable and experienced labour force that
Figure 1. The ESI model.
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drives down costs through reduced training expenditure and efficiency gains accruing from
repeated tasks and learning effects.
A recent survey by KPMG revealed that half of the companies reported having suffered sig-
nificant setbacks and loss of income due to the departure of key employees (KPMG, 1998).
Moreover, frequent employee turnover affects organisational efficiency and the morale of
those who stay in the company. As a result, organisations that can keep quality personnel will
influence their capabilities to offer quality products or services to their customers.
Alavi & Leidner (2001) point out that the turnover of knowledge workers is usually high and
one way to keep knowledge inside the firm is to keep employees happy. Researchers have shown
that job satisfaction is one of the best predictors of employee loyalty (Eskildsen & Nussler, 2000;
Fosam et al., 1998; Martensen & Gronholdt, 2001; Schiesinger & Heskett, 1991).
Employee satisfaction and job performance
Rucci et al. (1998) show that a 5-point improvement in employee attitudes will drive a 1.3-point
improvement in customer satisfaction, which in turn will drive a 0.5% improvement in revenue
growth. They call this ‘the employee-customer-profit chain’ in Sears. Heskett et al. (1997) also
develop and conceptualise the ‘service profit chain’ in which employee satisfaction and loyalty
initiate a chain of performance links between quality, productivity, service value, customer sat-
isfaction and loyalty, which in turn drives profit and growth. Internal marketing theorists have
argued that it is impossible for business to provide better service to external customers than
they provide to their internal customers (Gronroos, 1983). The underlying assumption is that
satisfied employees are more motivated and harder working than dissatisfied ones.
It is widely agreed that there are two overriding dimensions of job performance – task per-
formance and contextual performance (Borman & Motowidlo, 1993; Motowidlo & Van
Scotter, 1994). Task performance includes behaviours that contribute to the core activities in
an organisation, such as producing products, selling merchandise, managing subordinates or
delivering services (Motowidlo & Schmit, 1999). Contextual performance, in contrast, refers
to behaviours that contribute to the culture and climate of the organisation. That is, the
context within which the core activities are carried out, such as volunteering for the extra
work, persisting with enthusiasm, helping and cooperating with others, following rules and pro-
cedures, and supporting or defending the organisation (Borman & Motowidlo, 1993). The effec-
tive functioning of an organisation depends on employee efforts that extend beyond formal
duties. Campbell (1976) demonstrated in several studies the classic tenet that ‘performance ¼
motivation � ability.’ Accordingly, employee satisfaction is expected to have a positive
impact on task performance and contextual performance.
ESI antecedents
Employee satisfaction is the gratification or prosperity that the employees get from their job
(Moorhead & Griffin, 1998) or a person’s evaluation of the overall quality of his present job
(Pool, 1997; Reilly et al., 1991). A great deal of the research on this issue has been dominated
by the person–environment fit paradigm, stating that the more a person’s work environment ful-
fills his or her needs, the greater the degree of job satisfaction (Kristof, 1996; Mottaz, 1985).
Extrinsic rewards and employee satisfaction
Maslow (1954) stated that people are motivated by a hierarchy of needs: (1) physiological
needs (e.g. hunger and thirst); (2) safety needs (e.g. shelter and protection); (3) social needs
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(e.g. satisfactory and supportive relationships); (4) ego or esteem needs (e.g. belief in oneself);
and (5) self-fulfillment needs. According to Maslow, the lower needs (e.g. physiological or
safety) must be satisfied before a person will have higher needs (e.g. esteem or self-fulfillment).
These lower needs are more extrinsic or material, while the higher needs are more intrinsic or
mental. Accordingly, to induce greater motivational force, employers need to provide promising
links between employee performance and the reward system. An abundance of literature has
linked extrinsic rewards such as pay (Eskildsen et al., 2004; Liou et al., 1990; Ting, 1997)
and fringe benefits (Barber et al., 1992) to increased job satisfaction. Thus, extrinsic reward
is expected to have a positive impact on employee satisfaction.
Supervisory support and employee satisfaction
Superiors can teach, coach, develop and influence employees and they are the most salient repre-
sentatives of management actions, policies and procedures. Subordinates tend to generalise their
perceptions of superiors to their organisation at large (Kozlowski & Doherty, 1989). Subordi-
nates that have high-quality relationships with their supervisors will perceive their organisation
as providing greater autonomy, decision-making latitude and supportiveness. Numerous studies
have shown that positive relationship between supervisors and subordinates contribute to higher
levels of job satisfaction, in turn reducing stress and improving job performance (Daley, 1986;
Emmert & Taher, 1992; Eskildsen et al., 2004; Martensen & Gronholdt, 2001; Nachmias, 1988).
Fairness and employee satisfaction
Equity theory recognises that individuals are concerned not only with the absolute amount of
rewards they receive for their efforts, but also about the relationship this amount has to what
others receive. When people perceive an imbalance in their outcome–input ratio relative to
others, they may report diminishing job satisfaction and are more likely to leave. Adams
(1963, 1965) suggested that people learn about equity correlation between inputs and outputs
through socialisation and comparison processes with others. The challenge for organisations
therefore is not only to provide rewards but also to develop reward systems that are perceived
as fair and equitable. Thus, equity is expected to have a positive impact on employee
satisfaction.
Autonomy and employee satisfaction
Autonomy refers to the extent to which an individual or group of individuals has the freedom,
independence and direction to determine what actions are required and how best to execute them
(Henderson & Lee, 1992; Manz, 1992; Manz & Sims, 1980). According to job characteristics
theory, increasing levels of autonomy will enhance work outcomes in terms of job satisfaction
and performance (Campion et al., 1993; Henderson & Lee, 1992), because encouraging auton-
omy within the workplace heightens employees’ sense of self-efficacy and their motivation to
embark upon and accomplish certain tasks (Conger & Kanungo, 1988). In the literature on learn-
ing, autonomy is also considered an important facilitator of knowledge flow among individuals
and units in organisations (Nonaka & Takeuchi, 1995; Schulz, 2001). Therefore, autonomy is
expected to have a positive impact on employee satisfaction.
Corporate image and employee satisfaction
Corporate image refers to the brand name and the kind of associations that employees get from
it. When employees regard the company as having a good image, they tend to perceive a sense of
pride and accomplishment. Organisational image has powerful motivational effects on job
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satisfaction. Research on customer satisfaction has shown that corporate image has a positive
impact on customer satisfaction (Gronholdt et al., 2000; Kristensen et al., 2000). Parallel to
this argument, we suggest that corporate image is expected to have a positive impact on the
employee satisfaction level.
Affiliation and employee satisfaction
Employees also seek job satisfaction from the social aspects of their work. People enjoy inter-
acting with others. Interpersonal relations among workers may lead to certain group dynamics,
which in turn affect organisational productivity and job satisfaction (Eskildsen et al., 2004;
Martensen & Gronholdt, 2001). Social support leads an employee to believe that he or she is
cared for, esteemed and belongs to a social network. As a result, affiliation is expected to have
a positive impact on employee satisfaction.
Employee development and employee satisfaction
One of the challenges faced by knowledge workers is the constant change in technology. The
pressure to keep up with the technology creates considerable job stress and fear of obsolescence.
In an effort to help and motivate them, management must provide training opportunities to
enhance employee skills and opportunities for career development.
Herzberg (1966) argued that for an employee to be truly motivated, the employee’s job
must be fully enriched where the employee has the opportunity for achievement, recognition,
stimulation, responsibility and advancement. Employees prefer to work in environments that
provide a challenge, offer opportunities for learning and personal development. Thus, employee
development is expected to have a positive impact on employee satisfaction.
Methods
Research site and data collection
High-tech firms often find themselves operating in business environments fraught with unprece-
dented, unparalleled, unrelenting, and largely unpredictable change. Therefore, a company’s
success depends on it ability to attract and continually motivate its employees to contribute
their knowledge. This research was undertaken at the XY (a pseudonym) company. Founded
in 1997, XY Corp. is a market leader in designing, manufacturing and selling a wide range of
high performance COMS ICs. With extensive experience in sophisticated design techniques and
state-of-the-art process technology, XY Corp. has developed into a capable, highly competitive
silicon solution provider. Understanding why employee dissatisfaction occurs, the requirements
of employees, and the directions to implement changes are essential for the company. The
company employed 161 people. Throughout the data collection process, every employee was
assured that the responses would be kept confidential and that all results would be presented
only on an aggregate level. The response rate was 82% (132 employees).
Measure
All constructs were measured at the individual level. Whenever possible, the instruments used to
operationalise the constructs were adopted from past research. In designing the questionnaire, a
10-point Likert scale (strongly disagree to strongly agree) was used to reduce the statistical
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problems of extreme skewness (Fornell, 1992). The format and content of the questionnaire were
pre-tested using doctoral students and faculty members familiar with this issue.
Extrinsic reward was assessed by the two-item scale, including compensation package (pay,
bonus, incentives, profit sharing and stock programs) and additional benefits (insurance and
welfare activities). Supervisory support was measured by a four-item scale based on Currivan
(1999) and Lee (2004). Reward fairness was assessed by a two-item scale used by Matzler
et al. (2004). Autonomy was assessed by a three-item scale based on Currivan (1999) and Spreit-
zer (1995). Corporate image was measured using a two-item scale. The items were ‘I am proud
to work for the company’ and ‘I recognise the value of the company’. Affinity was assessed by
using a three-item scale based on Currivan (1999) and Lee (2004). Employee development was
measured by a four-item scale. The four items were: ‘I am satisfied with the opportunities given
to me for my promotion or career advancement’, ‘The training programs including internal/outside training, learning from daily operations help me perform’, ‘The company provides an
adequate learning environment to help employees grow’ and ‘The company values its employ-
ees and helps employees grow as well as develop their potentials.’ Job satisfaction here is
defined and measured as overall job satisfaction, not as satisfaction with various facets of the
job. We adopted Fornell et al. (1996)’s question on customer satisfaction and rewarded it to
fit our employee satisfaction context. Employee loyalty was measured by a two-item scale.
The two items were: ‘I would recommend the company to others as a good place to work’
and ‘I am willing to work for the company.’ Following discussions with XY Corp.’s manage-
ment, it became apparent that supervisor-related employee performance would be difficult to
obtain due to issues of employee confidentiality. Accordingly, we opted to measure performance
via self-reporting measures. Task and contextual performance was assessed by the three-item
scale based on Teigland and Wasko (2003), respectively.
Results
The research model was tested using PLS, a structural modelling technique that is well suited for
highly complex predictive models (Wold, 1985). PLS has several strengths that made it appro-
priate for this study, including its ability to measure the theoretical model during the early devel-
opment stage where the theoretical model and its measures are not well formed and the required
sample size is small1 (Barclay et al., 1995). Because all of the constructs have reflective indi-
cators in the theoretical model, the minimum sample size was determined using the largest
number of antecedent constructs leading to an endogenous construct. The sample size is 132,
exceeding the recommended minimum of 70. In PLS, item reliability is assessed by examining
the loadings (see Table 1). All loadings exceeded the recommended threshold of 0.7 (Carmines
& Zeller, 1979).
To assess the convergent validity of constructs, researchers using PLS report the internal con-
sistency measure developed by Fornell and Larcker (1981), which is similar to Cronbach’s
alpha. Fornell & Larcker argued that their measure is more appropriate to Cronbach’s alpha
because it uses the item loadings obtained with the causal model. Table 1 lists the internal con-
sistency of each construct. Nunnally (1978) suggested that 0.7 as a benchmark for modes
reliability was applicable in the early stages of research. The internal consistency was larger
than 0.85. To assess discriminant validity, Fornell & Larcker suggested the use of Average
Variance Extracted (AVE), which should be greater than the variances shared between the construct.
The comparison can be made in the correlation matrix (see Table 2), including the correlations
between different constructs in the off-diagonal elements of the matrix, and the square roots
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Table 1. Survey items.
Extrinsic rewards
Internal consistency ¼ 0.91 LoadingIn general, I am satisfied with my compensation package (pay, bonus, incentives, profit
sharing and stock programs)0.93
In general, I am satisfied with the additional benefits, including insurance and welfareactivities
0.90
Supervisory supportInternal consistency ¼ 0.96 LoadingMy administrator can be relied upon when things get tough on my job 0.94My administrator is willing to listen to my job-related problems 0.94It is easy for me to talk to my supervisor when I need help 0.94I am satisfied with the overall guidance and responses of my supervisor 0.90
Reward fairnessInternal consistency ¼ 0.89 LoadingI am compensated fairly for the work I do 0.90Employees are held accountable for their performances with fair performance reviews and
treatments0.88
AutonomyInternal consistency ¼ 0.94 LoadingI can control the scheduling of my work 0.89I have significant autonomy in determining how I do my job 0.95I have considerable opportunity for independence and freedom in how I do my job 0.89
Corporate imageInternal consistency ¼ 0.96 LoadingI am proud to work for the company 0.97I recognise the value of the company 0.96
AffinityInternal consistency ¼ 0.94 LoadingWhen things get tough at work, I can always rely on my colleagues to help me solve the
problem0.93
It is easy for me to talk to my colleagues when I need help 0.85My colleagues are always willing to listen to my problem 0.94
Employee developmentInternal consistency ¼ 0.95 LoadingI am satisfied with the opportunities given to me for my promotion or career advancement 0.88The training programs including internal/outside training, learning from daily operations help
me perform0.90
The company provides an adequate learning environment to help employees grow 0.89The company helps employees grow as well as develop their potentials 0.96
Job satisfactionInternal consistency ¼ 0.97 LoadingOverall satisfaction 0.95Satisfaction level compared with expectation 0.97Satisfaction level compared with the ideal company 0.96
Employee loyaltyInternal consistency ¼ 0.93 LoadingI would recommend the company to others as a good place to work 0.94I am willing to work for the company 0.93
(Table continued)
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of the AVE for each of the constructs along the diagonal. For adequate discriminant validity, the
diagonal elements should be greater than the off-diagonal elements in the corresponding rows
and columns. Table 2 indicates that all constructs have adequate discriminant validity.
Structural equation model
Having established confidence in our measurement model, we examined the main effects. The
test of the structural equation model includes estimation of the path coefficients and R 2 values.
The path coefficients indicate the strengths of the relationships between the dependent and inde-
pendent variables and R 2 values represent the amount of variance explained by the independent
variables. Using LVPLS version 1.8 (Lohmoller, 1981), we determine path coefficients. To
further test the path significance, we employed the Jack-knife methods (see Figure 2).
Employee satisfaction was found to be positively associated with employee loyalty (b ¼ 0.78,
p , 0.001), task performance (b ¼ 0.20, p , 0.05) and contextual performance (b ¼ 0.49,
p , 0.001), respectively. That is, employee satisfaction is one of the best predictors of
Table 1. Continued.
Extrinsic rewards
Task performanceInternal consistency ¼ 0.86 LoadingI have a high level of expertise in the technology with which I work 0.65I am able to meet objectives set by my immediate superior 0.89I am able to meet my deadlines 0.98
Contextual performanceInternal consistency ¼ 0.87 LoadingI am willing to help others who have heavy workloads 0.73I am willing to others who have work related problems 0.91I am willing to go extra miles for the future of the company 0.85
Table 2. Correlations and discriminant validity.
Latent variables 1 2 3 4 5 6 7 8 9 10 11
1. Extrinsic reward 0.91 a
2. Supervisory support 0.41 0.933. Reward fairness 0.51 0.54 0.894. Autonomy 0.32 0.27 0.26 0.915. Corporate image 0.66 0.55 0.47 0.29 0.966. Affinity 0.45 0.62 0.44 0.34 0.60 0.917. Development 0.64 0.55 0.63 0.25 0.69 0.52 0.918. Satisfaction 0.65 0.65 0.64 0.36 0.67 057 0.68 0.969. Loyalty 0.57 0.54 0.61 0.19 0.59 0.48 0.62 0.68 0.93
10. Task performance 0.24 0.20 0.08 0.75 0.16 0.19 0.12 0.20 0.05 0.8211. Contextual performance 0.57 0.51 0.44 0.37 0.55 0.40 0.32 0.49 0.58 0.28 0.83
aDiagonal elements in bold are square roots of Average Variance Extracted.
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employee loyalty. Moreover, satisfied workers are more motivated and hard working, achieving
higher level of job performance.
In terms of the effects of antecedent constructs on the employee satisfaction, employee devel-
opment has the highest impact (b ¼ 0.25, p , 0.01), then extrinsic reward (b ¼ 0.24, p , 0.01),
supervisory support (b ¼ 0.22, p , 0.01), corporate image (b ¼ 0.17, p , 0.05), fairness
(b ¼ 0.10, p n.s.), affinity (b ¼ 0.09, p , 0.01), and autonomy (b ¼ 0.09, p n.s.).
The R 2 value represents the percentage of variance in an endogenous construct explained by
other constructs connected to it directly. Interpreted like multiple regression results, the R 2 value
indicates the amount of variance explained by the model. The overall model explained 73% of
the variance in job satisfaction. In addition, the model explained 60% of employee loyalty, 22%
of task performance and 24% of contextual performance. Considering the fact that a number of
factors might affect these constructs, the amount of variance explained by this parsimonious
model is good enough, adding support to the theoretical soundness. The ESI score2 was 74.2
(transformed into a 0- to 100-point scale to facilitate comparisons).
Strategic management map
Companies must consistently monitor the pulse of their workforce on those variables that have
the most impact on driving employee satisfaction. However, the biggest obstacle for organis-
ations to do so is the intangible nature of these variables. To address this issue, we built a stra-
tegic management map to examine the relative importance of each factor. Managers then can
prioritise areas for improvement based on the result presented in the strategic management map.
To build a strategic management map, we need to determine how much each factor contrib-
utes to the employee satisfaction level and the performance level of each factor. The strategic
management map consists of four quadrants: ‘do better’, ‘keep up’, ‘education’ and ‘no
change’ areas (see Figure 3). The size of the quadrants is determined strategically by managers
Figure 2. The ESI result (þp , 0.10; �p , 0.05; ��p , 0.01; ���p , 0.001).
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based on the company’s strategy and resources. For example, if a company has only limited
resources and wants to identify the most critical items for improvement, it can shrink the size
of the ‘do better’ area by setting a high threshold value for the estimated weights and setting
a low threshold value for the scores.
The quality attributes in the ‘do better’ quadrant (e.g. extrinsic rewards and employee develop-
ment) need the most attention from managers. These quality attributes are very important when
companies achieve low performance. Improvement in this quadrant would have the highest positive
impact. The quality attributes in the ‘keep up’ quadrant (e.g. supervisory support) should be well
maintained. These quality attributes are important for achieving high performance. However, les-
sening the effort on this quadrant would have a significant negative impact. In addition, companies
should try to educate their employees on the factors in the ‘education’ quadrant (e.g. autonomy and
affiliation). Although companies can perform well in this quadrant, these quality attributes are not
critically important. Through active and persuasive education on the importance of these factors,
companies can turn these quality attributes into competitive advantages. Finally, the factors in
the ‘no change’ quadrant (e.g. corporate image and fairness) should receive the least attention
from managers. Improving the factors in this quadrant has the least positive effect.
Conclusion and areas for future research
‘People are the most important asset of any organisation’ is a highly over-used and under-
believed statement. We spend an inordinate amount of time and energy focusing on customer
experience, without giving thought to employee satisfaction. Yet employee satisfaction is para-
mount because it will determine the success or failure of what the customer experiences (Comm
& Dennis, 2000). Moreover, satisfied employees are more motivated and harder working than
dissatisfied ones. Collectively, these individuals achieve higher levels of job performance,
which in turn increases organisational productivity and profitability. In return, these productivity
and profitability gains will allow the organisation to provide more rewards to its employees. That
is, treating employees as a valuable asset for organisations provides a win-win foundation for
both employees and organisations. Therefore, the first priority for an organisation’s knowledge
management should be to manage the employee satisfaction level. And our model is the first step
towards a meaningful and measurable index (ESI score) which shows the employee satisfaction
level. For example, in this study, the ESI score is 74.2.
Figure 3. Strategic management map.
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From a managerial perspective, it is crucial to know what factors influence employee satisfac-
tion. However, this is not an easy task because human nature is very complex. Worse, failure to
do this would increase employee frustration and result in poorer performance. To address this,
we develop a strategic management map to serve as a strategic tool for managers to understand
how to motivate employees by devising programs aimed at satisfying emerging or unmet needs.
Future studies can try to distinguish between factors that belong to motivator factors and
factors that belong to hygiene factors in order to further perfect research. Herzberg (2002)
suggested that factors involved in producing job satisfaction (motivators) are distinct from the
factors that lead to job dissatisfaction (hygiene). The motivator factors are intrinsic to the job,
while hygiene factors are extrinsic to the job.
Acknowledgement
This research is supported by Chung Hua University with project ID CHU-95-TR-05.
Notes
1. PLS requires a minimum sample size that equals 10 times the greater of (1) the indicators on the most complex
formative construct or (2) the largest number of antecedent constructs leading to an endogenous construct.
2.
Score ¼
Phi¼1 wixi �
Phi¼1 wi
9Ph
i¼1 wi
� 100
where h is the number of manifests variable within the latent variables and wi is the unstandardised weights.
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