THE RELATIVE USE OF FORMAL AND INFORMAL INFORMATION IN THE

EVALUATION OF INDIVIDUAL PERFORMANCE

by

GENE H. JOHNSON, B.B.A., M.S. in Acct.

A DISSERTATION

IN

BUSINESS ADMINISTRATION

Submitted to the Graduate Faculty of Texas Tech University in Partial Fulfillment of the Requirements for

the Degree of

DOCTOR OF PHILOSOPHY

December, 1986

•

//^,;¥

(c) 1986 Gene H. Johnson

ACKNOWLEDGMENTS

Funding for this research project was provided by the

National Association of Accountants, and was especially

beneficial in that it allowed the author to complete the

project in a timely manner. Subjects for the project were

provided by the research entity which must, for the sake of

anonymity, remain unnamed. Nonetheless, their partici­

pation is greatly appreciated.

Early conceptual development of the project was

facilitated by a number of individuals, including the

doctoral students and Professors Don Clancy and Frank

Collins of Texas Tech University. Also helpful were the

experiences of Louis Johnson, John Johnson, Sam Nichols,

Darrell Adams, and Del Shumate. The members of the

committee provided valuable guidance and support throughout

the project; and although not a member of the committee.

Professor Roy Howell provided valuable assistance with data

analysis. Finally, Professor Donald K. Clancy served not

only as committee chairman but also as a role model/mentor

for the author. His participation made the project

interesting, educational, and enjoyable.

11

CONTENTS

ACKNOWLEDGMENTS ii

ABSTRACT vi

LIST OF TABLES viii

LIST OF FIGURES ix

I. INTRODUCTION AND BACKGROUND 1

Formal and Informal Information 2

Performance Evaluation 4

Purpose, Objectives, and Significance . . 6

Organization 7

II. PREVIOUS STUDIES OF INFORMATION

FOR PERFORMANCE EVALUATION 8

Goals and Goal-Directed Behavior 9

Early Studies on Performance Measures . . 11

Budget-Based Studies 17

Contingency Theory 19

Agency Theory 21

Markets and Hierarchies 22

Managerial Performance Appraisal 25

Informal Information 30

Summary 3 3

111

III. DISCUSSION OF VARIABLES AND RELATIONSHIPS:

MODEL DEVELOPMENT 36

Theoretical Perspective 36

Potential Explanatory Variables 41

Research Perspective 42

The Relative Use of Formal and

Informal Information 44

Attitudes Toward Formal and

Informal Information 45

Locus of Control 49

Role Stress 51

Leadership Style 54

Other Relationships Among

Explanatory Variables 57

Variables of Interest: Summary 58

Hypotheses 59

The Research Model 61

IV. RESEARCH METHODOLOGY 64

A Two-Phase Field Study 64

Phase One: Development of the Instrument . 66

Phase Two: A Single-Entity Sample . . . . 73

Statistical Analysis - LISREL 78

V. EMPIRICAL RESULTS 86

Verification of the Research Constructs . 86

Demographics and Other Potential

Explanatory Variables 100

iv

Testing Hypotheses with LISREL 103

Tests of Hypotheses 105

Stress as an Endogenous Variable:

A Fitted Model 109

VI. SUMMARY AND CONCLUSIONS 114

Summary of Findings 114

Implications of the Use of

Informal Information 119

Implications of the Relationships

Among the Variables 120

Policy Implications 121

Limitations of the Study 123

Suggestions for Future Research 124

REFERENCES 127

APPENDICES

A. INTERVIEW SCHEDULE 138

B. QUESTIONNAIRE 140

C. ANALYSIS OF DEMOGRAPHIC VARIABLES 147

D. THE NULL MODEL 150

E. THE ATTITUDES MODEL 153

F. THE FITTED MODEL 156

V

ABSTRACT

Individual performance evaluation is a critical

managerial function. Judgments of individual performance

are evident in certain managerial decisions, such as those

regarding the pay, promotion, and termination of

subordinates. While much has been written about the

measurement of performance and about performance-appraisal

techniques, little is known about the information managers

use in evaluating individual performance. Accordingly,

this study was conducted for two reasons: 1) to study the

extent to which informal information (unofficial, or

"non-sanctioned") is used in individual performance

evaluation, and 2) to examine the relationships among a

number of explanatory variables and the relative use of

formal and informal information. '

A questionnaire was used to measure the relative use

of formal and informal information in performance-related

decision making (the dependent variable), attitudes toward

the information used (ATTITUDES), role stress, two

dimensions of superior's leadership style (structure and

consideration), and one personality variable (locus of

control). The responses indicate that informal information \

vi

is used relatively more than formal information in the |

evaluation of individual performance. Further, the

managers perceived the informal information easier to use

and understand, more qualitative, and more confidential

than the formal information.

Covariance structural equations modeling (LISREL) was

used to study the relationships among the research

variables. As hypothesized, attitudes toward the

information are strongly related to the relative use of

formal and informal information. The hypothesized

relationship between the research variable ATTITUDES and

role stress, and the influences of leadership style and

locus of control on stress are also supported. Not

supported by the data, however, are the hypothesized

relationships among the relative use of formal and informal

information and role stress, leadership style, and locus of

control, and the hypothesized relationships among

ATTITUDES, leadership style, and locus of control.

The findings suggest a discrepancy between the

formally agreed upon rules of governance in organizations

and the true system of rewards. Contractual disputes and

other dysfunctional consequences are implied. However,

another plausible explanation is that the informal

information is necessary in order to compensate for the

inadequacies of the formal information. Thus, the formal

and informal information may be complementary.

vii

LIST OF TABLES

4.1: Non-Response Bias Test Results 77

5.1: Responses to RUFI Items 87

5.2: Tests For Differences in RUFI Responses . . . . 89

5.3: Correlations Among RUFI Responses 90

5.4: Responses to ATTITUDES items 93

5.5: Tests for Differences in ATTITUDES Responses . 95

5.6: Initial Factor Loadings: ATTITUDES 97

5.7: Promax Rotated Factor Loadings: ATTITUDES . . . 98

5.8: Tests for Differences by Department 101

5.9: Tests for Differences by Faction 102

5.10: Tests of Direct Hypotheses 106

5.11: Preliminary Tests of Indirect Hypotheses . . . 108

5.12: Sequential Tests of Indirect Hypotheses . . . . 110

5.13: Total Effects: The Fitted Model 112

Vlll

LIST OF FIGURES

3.1: Preliminary Theoretical Model 37

3.2: Theoretical Model 39

3.3: Research Model 63

4.1: The LISREL Model 81

4.2: LISREL Notation 83

4.3: LISREL Equations 85

5.1: The Fitted Model 113

6.1: The Research Model in Context 117

IX

CHAPTER I

INTRODUCTION AND BACKGROUND

Individual performance evaluation is a critical

managerial function. Many business decisions are

influenced by evaluations of individuals' past performance

and expectations of individuals' future performance.

Generally, the accounting role in the performance

evaluation process is through the use of accounting reports

as measures of performance. However, the task of

performance measurement is situational and decisions are

made by individuals. Accordingly, the type of information

obtained by an evaluator, and the extent to which each type

of information is used in arriving at a decision vary from

situation to situation and from individual to individual.

Many organizations have attempted to structure the

performance evaluation process (or related decisions such

as pay, promotion, termination, etc.) by adopting policies,

procedures, guidelines, and standards. These "formal"

systems are designed to produce a performance report and

are intended to support personnel decisions. However, the

individuals who make the decisions are subject to a variety

of influences such as additional information and the

opinions of others. It is naive to assume that individuals

rely strictly on the output of formal information systems

when making performance related judgments and decisions.

This study addresses the relative use of formal and

informal (other) information in the evaluation of

individual performance and the relationships among relative

reliance on informal information and a number of potential

explanatory variables.

Formal and Informal Information

Information can be classified in a variety of ways.

In studying organizations it may be useful to classify

information according to function (operations support,

external reporting, decision support, etc.). It may also

be useful to classify information as either formal or

informal [Banbury and Nahapiet, 1979; Clancy and Collins,

1979; Dirsmith and Covaleski, 1985; Jiambalvo, Watson, and

Baumler, 1983]. Formal information systems can be thought

of as those "sanctioned" by senior management, the output

of which becomes a part of "organizational awareness"

[Clancy and Collins, 1979]. Formal systems are

characterized by policies, procedures, and other

documentation. A formal performance evaluation information

system would frequently involve accounting and/or personnel

department participation with performance represented

numerically. Suggestions or guidelines as to the factors

to be considered and the "weight" to be assigned to each

factor when making performance judgments would often be

included.

The output of formal systems can be referred to as

formal information. Accordingly, any other data relevant

to a decision is informal information. Informal

information systems need not be documented, sanctioned, or

otherwise "official" in order to be relied upon. Unlike

formal systems, informal information systems are difficult i

to characterize. Such systems range from detailed records

maintained methodically, to hearsay, rumor, and memory.

Informal systems may even be computerized. Informal

information may be indirectly incorporated into an

"official" system, reflected primarily as adjustments or

modifications to formal information, or overtly relied upon

and incorporated into the formal system. Informal

information may affect decisions but otherwise never be

documented or made known to others. Also, informal

information may be in non-numeric form, and in fact, may be

perceived by some managers as the antithesis to formally

measured performance. The only distinguishing factor is

that informal information is not produced or required by

the formal system.

It is likely that the accounting function in an

organization is a part of the formal information system,

although accountants' participation in an informal system

is not precluded. It is also likely that performance

related decisions are based on both formal and informal

information.

Performance Evaluation

Performance evaluation is a process that serves

judgmental purposes (retention, promotion, and reward) and

developmental purposes (planning, training and development,

and superior/subordinate communications) [Jiambalvo et al.,

1983] . The part of the evaluation process involving

accounting is the measurement process, which results in

numerical representations of events and transactions

[Flamholtz, 1980]. Performance measurement involves the

application of both procedural rules and instruments to

observable characteristics of performance. The performance

measurement process may be formal or informal just as other

aspects of the evaluation process may be formal or

informal. In formal performance measurement the rules and

instruments have been established and sanctioned by senior

management. With informal performance measurement either

the instrument or the procedural rules of application, or

both, will not be sanctioned. Judgment may or may not be

involved in application of the instruments and rules.

Performance evaluation is intertwined with other

business activities. Company commitments are based upon

assumptions of individuals' future performance. Production

scheduling and other resource allocation decisions are

affected by perceptions of the performance of the

individuals involved. Virtually any business-related

decision is in some way affected by the decision maker's

judgments and expectations about individuals' performance.

Accordingly, performance evaluation is likely to be a

continual process rather than a periodic exercise.

However, the evaluation of performance assumes a periodic

nature because the intensity of the process is much greater

at some times than others. There are specific periodic

decisions made by managers in which performance judgments

are manifest, such as pay, promotion, and termination

decisions. Also, many businesses require managers to

document evaluations of subordinates' performance at

regular intervals or specified times regardless of the need

for pay increase, promotion, or termination.

Performance evaluation is by necessity a judgmental

process. The evaluator will consider the pattern of

performance measures and must make a judgment regarding the

quality of the overall performance: poor, adequate, good,

or outstanding. When the evaluator is the superior to the

person evaluated, the judgments made will influence

decisions on retention, salary, promotion, and assignment.

Jiambalvo et al. [1983] classified performance

evaluation processes as formative ("coaching" purposes) and

summative (a necessary precedent to pay and promotion

decisions). The concept of "summative evaluation"

[Jiambalvo et al., 1983; Zedeck and Kafry, 1977] is

particularly useful in the following discussions.

Purpose, Objectives, and Significance

The purpose of this study was to improve our

understanding of the sources of information relied upon by

individuals in making performance related decisions in

organizations. It was intended to gather and interpret

evidence regarding the relative use of formal and informal

information. More specifically, there were two research

objectives:

1. To examine the extent to which informal

information is relied upon relative to formal

information (RUFI) in performance-related

decision making, and

2. To study the relationships among a number of

a priori explanatory variables and RUFI.

The results contribute to the small body of informal

information systems literature, and may stimulate

additional research efforts and contribute toward

improvement in both systems design and performance

measurement. Empirical evidence of the relative importance

of informal information systems in the accounting

literature is scarce—few published works have been

located.

7

Organization

In the following chapter, selected relevant works are

reviewed and discussed. Chapters III and IV provide

discussions of the relationships among the variables of

interest and the research methodology applied. The

empirical results are presented in Chapter V, and the

conclusions and implications are discussed in Chapter VI.

CHAPTER II

PREVIOUS STUDIES OF INFORMATION

FOR PERFORMANCE EVALUATION

Performance evaluation and performance information

utilization research has generated a substantial

literature. Selected representative works on goals and

goal-directed behavior demonstrate individuals' needs for

performance related information. Early studies on

organizational performance measures and budget-based

studies illustrate the importance of performance-related

information and suggest a need for informal information.

When applied to information systems in organizations,

contingency theory provides a framework for discussing a

number of factors with the potential to influence the

systems' effectiveness. From a total labor force

perspective, both agency theory and the markets and

hierarchies paradigm are consistent with informal

information usage. Finally, research addressing managerial

performance measurement and appraisal, and studies of

informal information in organizations are particularly

relevant.

8

Goals and Goal-Directed Behavior

One way in which individual performance evaluation

influences the attitudes and actions of individuals is

through communication of the results. The information

exchanged facilitates individuals' goal setting processes

and constitutes feedback (knowledge of the results of

goal-directed behavior).

Goals and goal-directed behavior were discussed by

Lewin, Dembo, Festinger, and Sears [1944] in relation to

their concept of "level of aspiration," and their

associated "resultant valence theory." Lewin et al.,

hypothesized that the choice of level of aspiration is the

result of three factors: the seeking of success, the

avoiding of failure, and a probability of success judgment.

The strength of each of these three factors is dependent

upon situational influence and individual characteristics.

Thus, levels of aspiration (goals) are a function of an

individual's perceptions and attitudes regarding the

desirability and likelihood (valences) of success vs.

failure in goal attainment. Further, levels of aspiration

are altered as information and experience influence

perceptions and attitudes.

In addition to facilitating goal setting, the revealed

output of both performance measurement and evaluation

provides the subordinate with knowledge of the results of

goal-directed behavior (feedback), which is related

10

strongly to performance [Becker, 1978; Locke, 1968; Erez,

1911J Locke, Shaw, Saari, and Latham, 1981; Cook, 1967;

Pavett, 1983; Ilgen, Fisher, and Taylor, 1979]. Based on a

comprehensive review of goal setting and task performance

in laboratory and field studies, Locke, Shaw, Sari, and

Latham [1981] noted that performance is effected (improved)

only when goals are set and feedback is provided:

Goal setting is most likely to improve task performance when the goals are specific and sufficiently challenging, the subjects have sufficient ability (and ability differences are controlled), feedback is provided to show progress in relation to the goal, rewards such as money are given for goal attainment, the experimenter or manager is supportive, and assigned goals are accepted by the individual [p. 125; emphasis added].

Since goals are determined by individuals' perceptions

and attitudes regarding future outcomes and likelihoods

[Lewin et al., 1944], goals must be expected to change over

time as information and experience influence perceptions

and attitudes. Although not explicitly recognizing the

influence of information on performance through goal

setting. Cook [1967] studied the effects of frequency of

feedback on attitudes and performance. In a simulated

business setting, student subjects receiving performance

reports more frequently were more successful and had more

positive attitudes than other student subject participants.

In spite of methodological weaknesses in Cook's study as

discussed by Becker [1967] and Jensen [1967], the study

11

provides empirical evidence of the need for, and importance

of, timely feedback regarding performance.

Relevance to the current study

Performance-related information has been found to be

important in improving performance through its influence on

goal setting and on goal-directed behavior. A number of

characteristics of the information, such as timeliness, are

also important. Information, formal or informal, should be

frequent, specific, involve the job challenges, and concern

subordinates' abilities and the use thereof. The

information should relate to agreed upon goals and evidence

the performance-reward relationship. Of particular

relevance to this study is the implication that perceptions

regarding certain characteristics, or attributes of the

information are indicative of the information's usefulness.

Accordingly, the relative use of formal and informal

information is likely to be influenced by perceptions

regarding certain attributes of both the formal and

informal information.

Early Studies on Performance Measures

Some work has focused on the measurement and control

of various parts of an organization (segments, divisions,

profit centers, investment centers) rather than on

individuals. The performance of certain organizational

12

components is often a primary determinant of, or surrogate

for, the individual performance of segment management.

However, the influence of organizational performance

measures may be widespread. Hopwood [1972, 1974]

identified a "contagion" effect in the use of accounting

information. The suggested result is a "trickle-down" of

the influence of measured organizational performance.

Ridgway [1956] and Tiessen and Waterhouse [1983] suggest

that organizational performance measures influence

behaviors and attitudes even when the information is not

intended to be used as a measure of individual performance.

The following discussion indicates how early behavioral

researchers questioned the practice of performance

measurement and noted dysfunctional behavior associated

with single numeric representations of performance.

Single Performance Measures

Argyris [1952] reported a tendency of workers to

manipulate production scheduling in order to obtain the

desired effect on measured performance in spite of the

potentially negative economic consequences to the firm.

Blau [1955] observed similar behavior in a service oriented

organization. Simon, Guetzkow, Kozmetsky, and Tyndall

[1954] noticed that the use of standard cost as a single

performance criterion often led to considerable

inefficiencies. Employees spent time and effort on the

13

nonproductive practice of arguing the accuracy and

appropriateness of the numbers. Apparently, a general lack

of trust had resulted from a history of errors and problems

related to the allocation of uncontrollable, or indirect

costs. Studies in the Soviet Union [Granick, 1954;

Berlinger, 1956; Horwitz, 1970] support the basic

conclusion that single measures of performance are often

accompanied by dysfunctional behavioral consequences.

Relevance to the current study. When formal systems

have single performance measures, managers will need to

supplement the formal system with additional criteria in

evaluating their subordinates in order to counteract the

negative effects of the single measure.

Multiple and Composite Measures

The use of multiple measures of performance (a number

of single measures of different aspects of performance) is

currently espoused in the normative literature [Horngren,

1982]. Closely related to the multiple measures approach

is the use of a composite measure of performance, which is

the result of mathematically combining a number of

performance measures into a single score. A composite

measure is a known function of multiple measures. Using

either multiple measures or composite scores, it is argued

in the normative literature that the dysfunctional

consequences of single measures can be avoided [Horngren,

14

1982]. However, the added complexity may be accompanied by

a different set of behavioral concerns.

Ridgway [1956] hypothesized that when faced with

multiple performance criteria (multiple measures), an

individual may experience ambiguity. If a particular

action has equally desirable results on all criteria, there

is no ambiguity. Typically, however, there are conflicts,

tradeoffs, and compromises. If the individual knows how

the multiple measures will be reflected in some overall

(composite) measure of performance, again there is no

ambiguity. But, if the individual is unaware of how the

multiple measures are to be combined, the employee will be

forced to use judgment in deciding where to expend

resources. Based on his review of the literature, Ridgway

concluded:

Quantitative performance measurements—whether single, multiple, or composite--are seen to have undesirable consequences for over-all organizational performance [p. 247].

Perhaps more importantly, Ridgway continues to note another

very important behavioral concern:

Even where performance measures are instituted purely for purposes of information, they are probably interpreted as definitions of the important aspects of that job or activity and hence have important implications for the motivation of behavior [p. 247].

Rosen and Schneck [1967] referred to Ridgway's

summarization of the behavioral problem(s) associated with

multiple measures of performance. They were unable to add

15

any additional sources of information pertinent to the use

of either multiple or composite performance, but again

concluded:

Dysfunctions to the organization result from the use of single, multiple, and composite measures of performance. Single measures may not be properly selected or broad enough to coincide with the organization's goals. To be effective, multiple measures must be arranged in their degree of importance. Otherwise, in situations of ambiguity, employees may not focus on the one measure that gives the most desirable results for the organization. Composite measures also have potentially unfavorable effects, depending upon how management uses them [p. 14] .

Relevance to the current study. Even multi­

dimensional measurements are inadequate representations of

performance when the behavioral consequences are

considered. The measurements can produce ambiguity and/or

result in dysfunctional consequences to the organization

whether or not they are presented as indicators of

performance. Again, the implication is that informal

information is needed to supplement the formal information.

Return on Investment (ROI)

Primarily because of a widespread move toward

organizational decentralization that began in the 1950s, a

particular composite performance measure relating income to

investment, return on investment (ROI), became popular with

companies in the 1960s [Mauriel and Anthony, 1966]. A

broad-based survey of United States businesses provided

16

Mauriel and Anthony the information necessary to reach

their most significant complaint about practice:

. . . that generally accepted accounting principles, including any internal company rules and procedures intended to govern the reporting to outsiders of financial data on the firm as a whole, tend to influence very strongly the methods used in calculating an investment center's profit and investment base [p. 99].

They continue to explain how the accounting distortions are

likely to produce incentives to favor the short-run

operations over the long-run growth of the organization.

The authors also consider the problems associated with the

use of ROI in determining executive compensation.

Mauriel and Anthony call for internal accounting

procedures based on the internal needs of the organization.

Similarly, Rappaport [1978] argues for the design of

incentive systems in such a manner as to avoid the

short-term emphasis of the "simplistic rhetoric of

accounting numbers" (ROI, earnings per share, or some other

measure of profit).

Reece and Cool [1978] replicated the Mauriel and

Anthony study and found that the use of GAAP-based ROI had

increased in use over a decade. In spite of a number of

critical flaws, ROI had become deeply ingrained in the

divisional performance evaluation process (only 3% of the

companies with investment centers reported no influence of

ROI on performance, and 74% of the companies surveyed

reported having investment centers). Also, GAAP-based

17

reports were deeply ingrained as performance measures (40%

of the companies reported no differences and/or

adjustments).

Relevance to the current study. Although widely

criticized in the literature, ROI and GAAP-based reports

strongly influence performance measurement and evaluation

practices in organizations. The inadequacies of numeric

representations of performance and the measurement error

attributable to the influence of GAAP are reflected in ROI.

Informal information is necessary to adjust for both.

Budget-Based Studies

Budgeting activities are pervasive in business just as

budget-based studies are abundant in the literature. Four

of these, regarding individual performance evaluation and

budgets, are particularly relevant to this study.

Argyris [1953] recognized the control function of

budgets, the pervasive influence of budgets in

organizational decision making, and the use of budgets in

individual performance evaluation:

Budgets are accounting techniques designed to control costs through people. As such their impact is felt by everyone in the organization. They are continuously being brought into the picture when anyone is trying to determine, plan, and implement an organizational policy or practice. Moreover, budgets frequently serve as a basis for rewarding and penalizing those in the organization [p. 97; emphasis on original].

18

Hopwood [1972, 1974] gathered empirical evidence

regarding the use of accounting information in performance

evaluation. He hypothesized that there were three distinct

styles of using budgeted and actual cost information:

budget constrained, profit conscious, and nonaccounting.

The Ohio State University leadership behavior descriptive

questionnaire (LBDQ) was used to measure various dimensions

of managerial style. Hopwood concluded that a manager is

more likely to be seen as using a budget constrained style

of evaluation if that manager has a leadership style low in

consideration and high in initiation of structure,

particularly if a budget constrained style is used by the

manager's superior (the contagion effect).

Otley [1978] replicated and extended Hopwood's earlier

study. Otley was particularly interested in the effects of

such intervening variables as the interactions among style

of budget use, budget accuracy, and profitability. He

concluded that it is inappropriate to use differences in

budget style to explain differences in performance because

both depend upon the state of the economic environment, and

pointed toward the need for:

. . . a more contingent theory of budgetary control based on differences in organizational types, the environmental circumstances in which they operate, and the norms and values current both within the organization itself and within the society in which it is set [p. 146].

19

Relevance to the current study

In spite of potential dysfunctional consequences,

budgets often constitute a large part of the formal

performance evaluation support system. Individual

variation in the use of budgetary information implies

individual variation in the use of other information as

well. If there are no other formal sources of performance

related information, informal information will be sought to

compensate for any perceived information inadequacies. In

explaining individual variation in the use of accounting

information, perceptions regarding the individual's

superior are particularly important (the contagion effect),

but there are a number of other potential influences.

Accordingly, the relative use of formal and informal

information in individual performance evaluation is

contingent upon such factors as superior's leadership

style, organizational type, environmental circumstance, and

norms and values.

Contingency Theory

Contingency theory has been applied to the study of a

variety of organizational phenomena. Hunt [1984] discusses

the contingency theory of organizational leadership, noting

its dominance as a research paradigm since the late 1960s.

Waterhouse and Tiessen [1978] suggest a contingency

framework for research in management accounting systems.

20

Relevant to this study is the research concerning

organizational structural contingencies.

Ford and Slocum [1977] summarize the literature

pertaining to the influence of size, technology, and

environment on the structure of organizations. The authors

measured four dimensions of organizational structure:

complexity, centralization, administrative intensity, and

formalization. Formalization was defined as:

. . . the degree to which rules and procedures within a system are specified and/or adhered to. As a strategy of control, it emcompasses both the existence of rules or procedures, whether or not they are codified, and the degree of variation allowed therein [p. 562].

Formalization was found to be positively related to both

technology (task routineness) and size (number of members),

and negatively related to environment (perceived

uncertainty).

Relevance to the current study

Contingency theory suggests that organizational

structures are dependent upon certain organizational and

environmental variables. Information systems are

organizational structures. Thus, formal and informal

systems of performance related information may be

contingent upon organizational and environmental variables.

Also, performance evaluation is based on information from a

variety of sources, formal and informal. Since

21

characteristics of both the formal and informal information

systems are contingent upon organizational and

environmental variables, the relative use of formal and

informal information is likely to vary due to

organizational and environmental variables.

Agency Theory

Agency theorists such as Arrow [1963; 1964; 1974],

Jensen and Meckling [1976] , and Demski and Feltham [1978]

view organizations:

. . . simply as a focus for a complex process in which the conflicting objectives of individuals are brought into equilibrium within the framework of contracts. In this sense, the behavior of an organization is like the behavior of a market in that it is the outcome of a complex equilibrium seeking process [Tiessen and Waterhouse, 1983; p. 254].

The fundamental principal/agent relationships are based on

contractual specifications of pay-off and risk sharing, and

the monitoring of behaviors is recognized to be imperfect

and costly. Pay-off is determined in accordance with

completely specified, contractual procedures for

performance measurement. Alterations in the

principal/agent relationship constitute renegotiation of

the employment contract.

22

Relevance to the current study

Agency theory does not preclude individual performance

evaluation nor the influence of informal information.

Performance measurement and pay-off are contractually

determined but the renegotiation process is not. The

result of individual performance evaluation is manifest in

the contract renegotiation process. Since renegotiation is

not contractually specified, performance evaluation

processes are by definition informal (non-contractual).

While agency theory is not inconsistent with the study

of information for performance evaluation, much of the

relationship between formal and informal information goes

beyond the hypothesized contractual relationships.

Markets and Hierarchies

The markets and hierarchies paradigm "is a positive

theory which seeks to explain the structure of markets and

hierarchies, and the division of activity between markets

and hierarchies" [Tiessen and Waterhouse, 1983; p. 258].

Based largely on the works of Williamson [1964, 1971, 1973,

1975], the markets and hierarchies paradigm emphasizes

information, structure, and control. Generally, the theory

suggests that hierarchies supplant markets when the market

transaction and contract enforcement costs become too

great. Regarding labor in organizations, hierarchies are

an alternative to a set of separate and individual

23

contracts. The hierarchical form of organization includes

an "internal labor market," membership in which

(employment) constitutes acceptance of an incomplete social

contract with the organization.

Subordinate managers have local information not

available to senior managers because they are closer to the

operations of their subdivisions. This information about

conditions and opportunities will be withheld (called

"information impactedness") unless senior managers offer

sufficient rewards in the form of opportunities and

security. Further, subordinates must learn specialized

skills, procedures, and language that have little value

outside the specific organization. In order to induce the

specialized learning, senior management must offer rewards

and continuity. The communication of local information and

the specialized learning become part of the performance

history of the subordinate.

The primary purposes for ex post accounting measures

in internal labor markets are "to assist in constructing

performance histories and in settling disputes" [Tiessen

and Waterhouse, 1983; p. 265]. While accounting numbers

may be arbitrary and unfair:

Other internal labor market customs and rules will simply adjust to compensate for the possibly undesirable direct effects of the accounting measures [Tiessen and Waterhouse, 1983, p. 265].

24

Relevance to the current study

Performance histories are not limited to a series of

accounting measurements, and "internal labor market customs

and rules" will require the consideration of informal

information in performance related decisions. Formal

performance information is included in the concept of

sanctioned performance history hypothesized in the

hierarchies and markets literature. While the terminology

differs, the substance and intent are similar. The

proportion of formal performance systems that are concerned

with long-run performance instead of short-term performance

measures is an empirical question already researched.

Reece and Cool [1978] and other findings indicate that the

majority of performance measures (circa 1978) are short-run

in nature. Thus, the markets and hierarchies paradigm does

provide a theory for why informal information is necessary

in the performance evaluation process. Since performance

measures are short-run in practice, informal information on

long-run performance and local information sharing is

necessary for performance evaluation. Further, since the

observed performance measures are GAAP-based, they must be

informally adjusted to make an equitable judgment on

performance.

25

Managerial Performance Appraisal

Performance appraisal, "which consists of the

observation and evaluation of an employee's work behavior

or the results of that behavior by someone," is the most

frequently used method of measuring employee performance

[Heneman, Schwab, Fossum, and Dyer, 1980; p. 116].

Periodic, all-purpose performance appraisal is a primary

subject in both descriptive and normative managerial

literature.

The normative literature addresses individual

performance in organizations from two approaches. First,

writers such as Landy and Farr [1983] and Heneman, Schwab,

Fossum, and Dyer [1980], emphasize measurement. Others,

typified by Lawler [1981] and Kane and Lawler [1979],

emphasize the subjective nature of the process. To the

former, periodic performance appraisal is the most common

method of performance measurement. To the later, periodic

performance appraisal serves a variety of purposes,

primarily developmental and reward allocation. Some

writers suggest that development and reward allocation are

incompatible functions [Kane and Lawler, 1979], while

others suggest that the tv;o functions may be inseparable

[Marshall, 1978].

Of particular relevance to this study are two surveys

of managerial performance appraisal practices and

techniques. A 1977 report by The Conference Board [Lazer

26

and Wikstrom, 1977] addressed current managerial

performance appraisal practices and existing performance

appraisal information systems. The study indicated that

managers were appraised annually (90%) and appraised by

their immediate superior (95%). A variety of techniques

was used to evaluate performance, the most common being

objective setting or MBO (management by objectives),

ratings, critical incident, checklists, and rankings or

comparisons. Further, 71% of the companies were found to

have formal appraisal systems for mid-to-low-level

management. Eight general categories of stated objectives

characterized the formal systems (presented in decreasing

frequency of occurrence):

Management development Performance measurement Performance improvement Compensation administration Identifying potential Feedback Manpower planning Communications [p. 11]

However, the actual uses of the performance appraisal

information were found to be quite different. The

responses were summarized into six groups (decreasing

frequency):

Performance feedback Compensation administration Promotion decisions Identifying management manpower needs Manpower planning Validation of selection procedures [p. 11]

27

A third ordering was suggested by a follow-up study of the

priorities associated with each of the six groups of uses

of performance appraisal (decreasing priority):

Compensation administration Performance feedback Identifying management development needs Promotion decisions Manpower planning Validation of selection procedures [p. 11]

The discrepancy between the stated objectives and the

actual use of the formal performance appraisal information

was attributed to dissatisfaction with the formal system.

A number of problems with the formal system was suggested,

with "conflicting multiple uses" being the most prevalent.

Even though the subjects seemed to perceive performance

appraisal for compensation adjustment purposes to differ

from performance appraisal for developmental purposes, the

data indicate that more than three-fourths of the companies

used the same appraisals for both.

Finally, the study found that "the performance of

managers not currently covered by a formal performance

appraisal system is still evaluated," citing a number of

subjects' descriptions of alternative (informal) appraisal

techniques:

Personal observation by the department head -nothing in writing

Our appraisal of managers consists of periodic visits with the supervisor, generally at salary evaluation time . . .

Seat of the pants

28

Since our management group is fairly small, we still enjoy an intimate set of supervisor-subordinate relations.

Performance evaluation, therefore, is an ongoing continuous activity rather than a fixed event occurring once a year

By their immediate supervisors, in whatever way the supervisor considers appropriate

Unwritten, mental appraisal

Observation by immediate supervisor, and confirmed by next highest supervisor. This is not usually written or even communicated . . . the "no news is good news" syndrome

Function of individual's manager's philosophy and techniques

What the boss's "tummy" tells him [Lazer and Wikstrom, 1977; page 23; subjects' descriptions deleted]

The findings reported by The Conference Board were

largely supported by a more recent report of the American

Management Associations (AMA) [Eichel and Bender, 1984].

Annual evaluations remained prevalent, particularly when

related to compensation adjustment. Goal setting, essays,

and critical incidents, respectively, continued to be the

three most commonly used techniques of performance

appraisal, but two new techniques, graphic ratings and BARS

(behaviorally anchored rating scales) were evident in

practice. Seven primary uses for performance evaluation

were identified (decreasing frequencies):

Compensation Counselling Training & development Promotion

29

Manpower planning Retention/discharge

Validation of selection technique [p. 12]

Again, the authors suggest that performance evaluation for

salary administration purposes differs from performance

evaluation for improvement and developmental purposes.

The AMA study did not specifically address sources of

information used in performance evaluation but did note

that the current legal environment required the use of a

formal, documented performance appraisal system emphasizing

quantification, replication, and standardization.

Relevance to the current study

Normative literature regarding performance

measurement, evaluation, and appraisal is abundant and

diverse. Both of the descriptive studies, however, suggest

that performance evaluation (appraisal) for compensation

related purposes is not the same as performance evaluation

for training and developmental purposes. Also, Lazer and

Wikstrom noticed a discrepancy between the formally stated

objectives of performance appraisal system and the actual

use of the information. Inadequacies of the formal

information are the identified causes of the discrepancy;

use of informal information to compensate for the

inadequacies is a likely result.

30

Informal Information

Four studies directly addressing informal information

in organizations have been identified. Clancy and Collins

[1977, 1979] report the results of a two-stage study (case

and questionnaire) of informal accounting information

systems. They defined a formal accounting information

system as:

. . . that which collects, stores, analyzes and reports events, typically of an economic and quantitative nature . . . (and) normally legitimized by top management [Clancy and Collins, 1979, pp. 21-22].

Informal accounting information systems were

"non-legitimized" or personally maintained. They found

that about 85% of the sampled managers kept an informal

system of records and, while the informal records were

important in control and evaluation, the records were

considered less important than the formal reports. The

questionnaire used by Clancy and Collins solicited

subjects' perceptions about a number of characteristics of

both the formal and informal information systems, such as

accuracy, understanding, importance, and level of detail.

Using the questionnaire data, Clancy and Collins determined

that the subjects perceived formal and informal information

systems as distinct and separate, and identified a number

of relevant characteristics. However, they were not able

to support their a priori expectations that the existence

of informal information systems would be correlated with

31

certain formal system characteristics. Generally, Clancy

and Collins conclude that informal a ccounting systems are

"a useful_and necessary adjunct to formal_systems rather

than an unnecessary dissipation of resources." Even though

the informal records were less important, both systems were

perceived to be useful and desirable by the subjects.

Collins and Johnson [1986] report the results of an

exploratory case study of organizational communication,

noting the importance of general, informal communication

activity. They suggest that general, informal

communications provide a "linking" function between j

organizational problems and solutions.

Based on series of interviews with individuals in

public accounting firms, Dirsmith and Covaleski [1985]

observed that "[all] individuals concurred that informal

communication networks were much in evidence" [p. 154;

emphasis on original], and that "[the] most mentioned theme

of informal communications was compensation" [p. 155] .

However, they disagreed with the conclusions of Clancy and

Collins [1979] regarding the complementarity of formal and

informal information systems. Instead they attribute

aberrant behavior to inaccuracies with, and perceptions

about, the informal information. However, the disagreement

may be one of semantics. Dirsmith and Covaleski suggest a

third "category" of information--nonformal. Nonformal

communications are seen to be distinct in that they are

32

associated with the formally recognized, "sanctioned"

practice of mentoring. What may have been "nonformal" to

Dirsmith and Covaleski may well have been "informal" to

Clancy and Collins.

Dirsmith and Covaleski's conclusions are also

inconsistent with the more recent findings of Collins and

Johnson [1986] regarding the importance of informal

communication activity. But again, the apparent

discrepancy is explainable. Collins and Johnson studied a

significantly less mature, formalized entity than the CPA

firms studied by Dirsmith and Covaleski. Accordingly, the

extent to which the formal performance evaluation support

system had been developed differed greatly.

Relevance to the current study

Researchers agree as to the pervasiveness of informal

information in organizations but disagree about its

effects. Informal information systems have been inferred

to complement formal information systems, and informal

communication activity has been demonstrated to be

beneficial to organizations. However, informal i

communications have also been shown to be dysfunctional.

While none of the studies of informal information activity

directly address performance evaluation, their inconsistent

conclusions suggest situational variability and semantic

difficulty in the study of informal information.

33

Summary

The evaluation of individual performance plays an

important role in organizations. Performance evaluation

influences goal setting and provides feedback regarding

goal-directed behavior. However, the relationships among

goals, performance, and feedback are situational.

Early studies on performance measures (single,

multiple, and composite) conclude that measures of various

aspects of organizational activity influence the behavior

of individuals even in cases in which the measures are not

intended to do so. Further, early budget studies indicate

the importance of budgets to individuals in organizations,

particularly because of their frequent use in pay and

promotion decision making. Also suggested is that some

effects "filter down" the organization thereby influencing

the behaviors of lower management. Potentially, the

dysfunctional consequences of organizational performance

measurement and the influences of budgeting will be evident

throughout the organization.

Periodic performance appraisals are pervasive.

Performance appraisals are used for a variety of purposes,

but the two most important and most frequent uses of

appraisals are compensation administration and feedback

(including counseling and development). In most formal

systems, and according to a great deal of the normative

literature, a single appraisal is intended to serve many

34

purposes. However, research has suggested that performance

appraisal for the purpose of compensation adjustment should

not be the same thing as performance appraisal for training

and developmental purposes. Since periodic performance

appraisals are incapable of supporting both salary

administration and training and development, superiors must

use additional information in at least one of the

processes.

From a total labor force perspective, the markets and

hierarchies literature recognizes the potential for

dysfunctional behavioral consequences of the use of

accounting measures alone because they are short-run in

nature, and suggests the role of informal information in

compensating for formal system inadequacies. This

complementary relationship between formal and informal

information is supported by Clancy and Collins [1979] and

Collins and Johnson [1986] , but disputed in Dirsmith and

Covaleski [1985].

Individual performance evaluation is influenced by a

number of situational and individual factors. Accordingly,

the relative use of formal and informal information in

performance evaluation is likely to be related to, or

contingent upon, a number of situational and individual

factors, or explanatory variables of interest. In the

following chapter, the dependent variable (relative use of

formal and informal information in individual performance

35

evaluation) and the explanatory variables of interest are

discussed, and illustrations of the expected relationships

among the variables are provided.

CHAPTER III

DISCUSSION OF VARIABLES AND RELATIONSHIPS

MODEL DEVELOPMENT

In this chapter, the research perspective is explained

and the variables of interest are discussed. Then,

hypotheses are stated in order to specify the a. priori

relationships among the variables, and a research model is

provided to illustrate the hypothesized relationships. In

the following chapter, the research methodology is

explained, and data gathering and analysis are discussed.

Theoretical Perspective

Performance information is relied upon in making

judgments about an individual's performance, and

performance judgments as a summative evaluation are a

primary determinant of performance related decisions

[Jiambalvo, Watson, and Baumler, 1983; Howell, 1976; Zedeck

and Kafry, 1977]. Therefore, performance evaluation is an

intervening variable between the relevant information and

performance-related decisions, such as pay, promotion, and

termination. Figure 3.1 (following page) illustrates these

basic relationships.

36

37

Performance

I n f o r m a t i on

Pe r fo rmance

E v a l u a t i on

Pay, P r o m o t i o n , or

T e r m i n a t i o n D e c i s i o n

Figure 3 . 1 : Preliminary Theoret ical Model

38

One characteristic of the relationship between

performance information and performance evaluation is the

relative use of formal and informal information (RUFI).

Variation in RUFI may evidence moderating effects of a

number of factors on the relationship betv/een information

and evaluation. From an individual decision-maker's

perspective, RUFI may be partially determined by that

individual's attitudes toward the information. Variance in

RUFI may be partially attributable to variation in

individuals' attitudes toward the information (ATTITUDES).

With the addition of the moderating variable (ATTITUDES)

and in illustration of the variable of interest (RUFI),

Figure 3.2 (following page) depicts the theoretical model.

Since the design of jobs influences the approach and

content of performance evaluation, variation in RUFI may

also be attributable to variation in the nature and content

of the individuals' organizational function. The nature

and content of jobs vary both within and among

organizations. Organizational size, technology, and

environment are likely to influence the design of jobs from

organization to organization. Delineation of

responsibilities within organizations (sales, production,

support, etc.) is likely to influence the design of jobs

within organizations. Of primary concern in this study,

however, are the individually-oriented factors that

influence RUFI. Thus, the models presented in this chapter

39

Per formance

I n f o r m a t i on RUFI

A

Per fo rmance

E v a l u a t i on • ^

Pay, P r o m o t i o n , or

T e r m i n a t i o n D e c i s i o n

A t t i t u d e s Toward I n f o r m a t i o n

Figure 3 . 2 : T h e o r e t i c a l Model

40

do not depict the influence of variation in job design on

RUFI, and the sampling procedures discussed in the

following chapter were designed to control for both

interorganizational and intraorganizational variation in

the nature of the individuals' jobs.

In this study, attitudes toward the information (and

other individually-oriented factors) are expected to

moderate the relationship between information and

evaluation. The relative use of formal and informal

information (RUFI) is descriptive of the relationship

between information and evaluation, and variation in RUFI

indicative of moderating effects on that relationship.

Finally, the results of performance evaluation are presumed

to be manifest in pay, promotion, and termination

decisions.

Under the hierarchies and markets theory [Tiessen and

Waterhouse, 1983] , a performance history is a necessary

part of an "internal labor market" that encourages

subordinates to reveal private information. In a dynamic

setting, the results of performance decisions become part

of the performance history of the employee. Thus, the

relationships illustrated in the theoretical models may not

be unidirectional as indicated. The static, unidirectional

models are presented in order to emphasize the primary

41

theoretical relationships. Of primary concern in this

study is the formal/informal classification, regardless of

the current/historical nature of the information.

Potential Explanatory Variables

In addition to ATTITUDES, there are a number of

measurable personality traits and other individually-

oriented variables with the potential of explaining

variation in RUFI. Possibilities include perceived role

stress; leadership style; the "needs" variables of power,

achievement, and affiliation; Jungian type;

Machiavellianism; authoritarianism; and demographic

variables such as age, tenure, and sex. Included in this

study, however, are only those variables for which an

a priori statement of casual relationship with RUFI could

be provided. Previous discussions justified the inclusion

of ATTITUDES as an explanatory variable. The following

discussion of the research perspective adopted explains why

role stress and superiors' leadership style are included.

One additional variable, locus of control, is included

since an extensive theoretical articulation and a pervasive

empirical base support a priori specification of the

relationships among locus of control and the other research

constructs of interest.

42

Research Perspective

Some researchers (see Collins and Clancy [1980]; *

Collins [1982]; Collins, Seller, and Clancy [1984]; Collins

and Johnson [1986]; Collins, Munter, and Finn [1983]) have

adopted the role perspective suggested by Katz and Kahn

[1967], viewing organizations as dynamic, interactive

systems capable of being described in terms of roles and

norms. Roles and norms are closely related concepts; the

former referring to a sets of behaviors and the latter

representing limitations, or expectations about the former.

Collins and Clancy [1980] note that "roles exist in

relationship to other roles," [p. 1] and recognize the

particular importance of the role-related expectations of

"salient" others [p. 2]. In a business setting, an

individual's superior is likely to be a particularly

salient other. Thus, both perceived role stress and

perceived leadership style (superiors') are likely to be

useful explainers of attitudes and behaviors of individuals

in organizations.

The influence of extraorganizational factors on

individual behavior (the external environment) is not

inconsistent with the research perspective. Norms and

roles are the result of both internal and external

influences. External influence is evident in the

subsystems within an organization [Katz and Kahn, 1967;

Collins and Clancy, 1980], and therefore is reflected in

43

individuals' attitudes toward those systems. Collins

[1982, p. 1] suggests that certain information-providing

subsystems "are useful in communicating role expectations."

Thus, additional external influence is evident in

individuals' role-related perceptions. Finally,

organizational attributes such as size, structure, and

technology also evidence external influence. To the extent

that individuals' perceptions and attitudes vary among

organizations, organizational variables such as size,

structure, and technology, are potentially useful

explanatory variables. Organizational variables are not

useful, however, in explaining variation within

organizations.

This study focuses on RUFI and on individually-

oriented factors that influence RUFI. Subjects' attitudes

and perceptions constitute the primary empirical evidence.

Also, a role perspective is adopted both in discussing

information systems in organizations and in studying the

attitudes of individuals. Thus, the role related variables

of role stress and perceived superiors' leadership style

are included as explanatory variables. Finally, a

personality variable, locus of control is of interest

largely because of the vast empirical history of the

construct and the intuitive appeal of locus of control as

an explanatory variable. Beginning with the dependent

44

variable, RUFI, discussions of each of the research

variables of interest follow.

The Relative Use of Formal and Informal Information

As previously stated, there are two primary research

objectives:

1. To examine the extent to which informal

information is relied upon relative to formal

information (RUFI) in performance-related

decision making, and

2. To study the relationships among a number of

a. priori explanatory variables and RUFI.

The dependent variable of interest, THE RELATIVE USE OF

FORMAL AND INFORMAL INFORMATION (RUFI), is operationally

defined as the extent to which formal information is

perceived to be relied upon relative to informal

information in performance-related decision-making in

organizations. This variable directly addresses the first

research objective; explained variation in RUFI addresses

the second.

RUFI is of particular relevance to anformation systems

analysis and design. In fact, RUFI might be considered as

a measure of the influence of the formal, or official,

system of performance information. Heavy reliance on

formal information (relative to informal) suggests that an

45

organization's formal system influences managers' judgments

greatly. Conversely, relatively heavy reliance on informal

information suggests that the formal system has less

influence. Positive and normative issues arise: To what

extent i_s the formal information relied upon (relative

to informal) and what factors explain the variation in use;

and to what extent should the formal information be

relied upon (relative to informal) and how can the reliance

be influenced? This study addresses the subject from a

positive research perspective.

In order to provide comparability, a definition of the

term "informal" similar to that applied by Clancy and

Collins [1979] is used in this study. Accordingly,

informal information is defined by default, as that which

is not formal. Formal information is that information

produced or required by official, "sanctioned" information

systems. All other information is informal. A large part

of the variation in RUFI is expected to be attributable to

attitudes toward both the formal (official) information and

the informal (other) information relied upon.

Attitudes Toward Formal and Informal Information

Perhaps most relevant to the designers of information

systems are the relationships among attitudes toward formal

and informal information and RUFI. Descriptive conclusions

46

and normative suggestions are likely to concern certain

attributes of the information, such as timeliness,

completeness, accuracy or confidentiality. Clancy and

Collins [1979] suggest several reasons for the informal

collection of accounting information, many of which refer

to formal system inadequacies:

1. Limitations of the formal information system. a. Reports not tailored to individual user

needs b. Untimely (tardy) reporting c. Lack of data reliability d. Inappropriate level of data aggregation

or grouping regarding individual user needs

2. Limitations of the organizational environment. a. Lack of trust between report users and

preparers b. The need for a defense mechanism in

their performance evaluation involving formal system data ("covering tracks")

c. A perceived need on the part of managers for information confidentiality

d. Failure of formal system to measure personalized manager goals

e. Informal accounting records may be helpful in learning (memorizing) currently important operational information [pp. 23-24].

While certain characteristics or attributes may be

more important than others, individuals are likely to have

a general attitude toward formal and informal information.

Perceptions regarding certain characteristics of the

information are indicative of such a general attitude. As

indicated in the following descriptive categories, there

may be a wide range of general attitudes toward informal

performance information:

iX

v

47

1. Highly negative: Informal information used in

performance evaluation is inherently bad.

If the information was any good, it could

easily be included in the formal system.

2. Mildly negative: Informal information is a

necessary evil. Even the most detailed,

bureaucratic formal system will not be able

to measure all the significant aspects of a

manager's performance.

3. Mildly positive: Informal information in

performance evaluation is necessary for the

exercise of good management. Good and poor

performance can be hidden in the details of

formal systems because the formal system cannot

consider all significant aspects of performance

and the unique facts and circumstances of each

manager.

4. Highly positive: Informal information is

most often an accurate indicator of performance.

Informal information is critical for the exercise

of good supervision of employees. Without

informal information, a manager is blinded by the

formal reports.

48

Attitudes toward the formal system may vary as well:

1- Highly negative: Formal performance measurement

systems are highly bureaucratic, satisficing

procedures with dysfunctional consequences.

2. Mildly negative: Formal performance measurement

systems do tell us something about performance,

but are far from complete.

3- Mildly positive: Formal systems are necessary

for adequate control, but some supplementary

information is needed.

4. Highly positive: Formal performance measurement

is a useful exercise in good management, and need

not be supplemented with additional information.

Perceptions regarding such attributes as completeness,

accuracy, usefulness, understandability, and

confidentiality of both formal and informal information

reflect individuals' general attitudes toward each. Thus,

the research construct, ATTITUDES, consists of two

dimensions—attitudes toward formal information and

attitudes toward informal information. Variation in

ATTITUDES is expected to explain a significant part of the

variation in RUFI. Generally, relatively positive

attitudes toward formal (informal) information is expected

to result in relatively greater reliance on formal

(informal) information.

49

Locus of Control

The concept of locus of control refers to individuals'

attributions regarding the control over events. Internals

attribute control to themselves, whereas externals

attribute control to outside forces. Spector [1982]

summarized the empirical research as follows:

. . . locus of control is related to motivation, effort, performance, satisfaction, perception of the job, compliance with authority, and supervisory style [p. 482].

Brownell [1979; 1981; 1982b] studied locus of control

as a moderator of the relationship between participation in

budgeting and organizational effectiveness (performance).

Brownell justified the treatment of locus of control as a

personality variable "simply as a function of the sheer

weight of evidence concerning the wide variety of

situations across which predictions regarding locus of

control have been confirmed" [1979; p. 41]. In general,

budgetary participation was found to have a positive effect

on the performance of internals and a negative effect on

the performance of externals [1981]. Since the budget is

often an important component related to performance

evaluation, the findings of Brownell suggest that locus of

control is relevant to this study as well.

Licata, Strawser, and Welker [1986] report the results

of an experiment that supports their hypothesis that

internal managers allow subordinates greater participation

50

in budgeting than do external managers. In another

experiment, Goodstadt and Hjelle [1973] found internals

exhibiting a personal, persuasive style of supervision and

externals exhibiting a coercive style. Both experiments

suggest that internals use a more flexible, subordinate

oriented managerial style. Implied is the use of a wider

range of information in performance related decision making

by internals than by externals.

Licata et al. suggest that:

It is conceivable that a supervisor involved in budget preparation may have a choice as to the amount of influence he will allow the subordinate to have on his determination of the budget and, further, that locus of control may affect the superior's behavior . . . biasing either toward or away from the subordinate's performance expectations [pg. 113].

The logical extension is that locus of control may affect

the superior's behavior regarding the evaluation of the

subordinate's performance as well.

In explaining the relative use of formal and informal

information systems, LOCUS OF CONTROL may be significant

not just because of relationships with other performance

related variables. In a laboratory experiment, Harvey,

Barnes, Sperry, and Harris [1974] found that internals

perceive more alternatives in a choice situation than do

externals. Accordingly, informal information systems are

more likely to be considered viable alternatives, or

supplements to the formal system by internals than by

51

externals. Conversely, externals may rely more on formal

systems than do internals because they are relatively less

able to perceive alternatives and are more likely to accept

what information is placed before them by the formal

system. Also, internals have been shown to exhibit less

conformity than externals [Crowne and Liverant, 1963].

Again, internals would be expected to rely relatively less

on formal information than do externals, particularly if

the individuals perceive pressure to conform to the formal

system.

Generally, externals are expected to have more

favorable attitudes toward, and rely relatively more on

formal information, whereas internals are expected to have

more favorable attitudes toward, and rely relatively more

on informal information systems.

Role Stress

Role stress is best defined as the strain that results

from one or both of two situations: role conflict and role

ambiguity [Kahn, Wolfe, Quinn, Snoek, and Rosenthal, 1964].

Based on their review of the literature. Van Sell, Brief,

and Schuler [1981] defined role conflict as "incongruity of

expectations associated with a role" [p. 44], but were

unable to provide a specific definition for role ambiguity,

noting the lack of an elaborate conceptualization in the

literature (see also McGrath [1976] and Sarbin and Allen

52

[1968]). The following forms of role ambiguity are

suggested by Van Sell et al:

(a) information is unclear regarding which potential role expectation—A, B, or C—should be performed;

(b) it is understood that expectation A should be met, but information is unclear regarding what behavior will in fact yield A;

(c) the consequences of behavior A are unclear [p. 44] .

Rizzo, House, and Lirtzman [1970] developed a

frequently used role stress measurement instrument and

provided the initial support for interpretation of the

scale's results along the two dimensions of conflict and

ambiguity. High construct validity and continued use of

the scale are supported by a psychometric evaluation

reported by Schuler, Aldag, and Brief [1977] and in the

review and discussion of Van Sell, Brief, and Schuler

[1981]. However, the later are careful to note high

correlation between the two constructs and to suggest

bi-directional causation. More recently, Howell and Wilcox

[1986], caution against separate interpretation of the two

dimensions of the scale on the basis of another

psychometric analysis. In this study, role stress is of

concern as an explanatory variable. Thus, the composition

of stress by dimension is secondary since the type, or

cause, of stress is not of primary concern.

53

Role stress has been studied in relation to a variety

of other research constructs. It has been hypothesized to

be related to budgetary attitudes [Collins, 1978; Collins

and Seller, 1981; Collins, Seller, and Clancy, 1984],

satisfaction [Sapp and Seller, 1980], leadership style

[Rizzo, House, and Lirtzman, 1970; Collins, Anderson, and

White; 1984], employee turnover [Ivancevich and Donnelly,

1975; Sorensen and Sorensen, 1974; Lyons, 1976],

performance [Greene, 1972; Brief and Aldag, 1976; Haas,

1964] , and perhaps most significantly to job satisfaction

(see Van Sell, Brief, and Schuler, [1981] for a review).

The hypothesized psychological and physiological

effects of stress on individuals are diverse. From a

psychological perspective, stress is often assumed to

result in fixed, or dominant (well-learned) response, but

the nature of this dominant response is situational, as

noted by Zajonc [1980] :

Stress conditions often elicit fixed response patterns, and different stress conditions elicit different responses in different species (e.g., quails freeze in the presence of a hawk, and rats attack each other when receiving electric shock) [p. 54] .

The general theme of the psychological literature

suggests that individuals under stress resort to what is

well-known, established, and "easy." Thus, an individual

under stress is likely to use the formal information system

since it is known, supported, and documented. In general,

54

high (low) ROLE STRESS is expected to influence both

ATTITUDES and RUFI in favor of formal (informal)

information.

Leadership Style

A great deal of leadership research is evident in the

social psychological literature (reviewed by Hosking [1981]

and Chemers [1983]). Much of the leadership research

focuses on the behaviors of the leader [Chemers, 1983; p.

10]. One extensive leader behavior research program was

conducted at the Ohio State University and produced the

Leadership Behavior Description Questionnaire (LBDQ), a

150-item scale to measure leader behavior [Hemphill, 1950;

Hemphill and Coons, 1957; Stogdill, 1963]. Halpin and

Winer [1957] used factor analytic techniques to identify

two primary factors, or dimensions, of leader behavior

reflected in the LBDQ data: consideration and initiation

of structure. Consideration is characterized by mutual

trust and respect, warmth, and open communications.

Initiation of structure refers to task directed

organizational and structural activities. These two

dimensions of leader behavior are conceptually similar

to the employee oriented and production oriented

supervisory styles identified by Kahn [1951] and Katz and

Kahn [1966] , the socioeconomic specialist and task

55

specialist referred to by Bales and Slater [1945], and

concern for people and concern for production supported

by Blake and Mouton, [1964]. Much of the research in

organizations concerning leadership utilizes the structure

and consideration dimensions [DeCoster and Fertakis, 1968;

Revsine, 1970; Hopwood, 1972, 1974; Otley, 1978; Collins,

Anderson, and White, 1984].

Of particular relevance to this research are studies

of leadership style and budgeting practices [Hopwood, 1972,

1974; Otley, 1978; and Brownell, 1982a and 1983].

Generally, Hopwood was able to support the contention that

a budget-constrained leadership style leads to job related

tension, and suggested that the increase in tension has

dysfunctional consequences. Otley's attempt to replicate

Hopwood's work resulted in apparently conflicting data,

suggesting a positive association between performance and a

budget-related leadership style. Finally, Brownell

extended the previous studies, noting that:

. . . a budget-focused leadership style is most effective under conditions of high participation, but is ineffective where participation is low [p. 13] .

Thus, relationships between leadership style and

subordinate performance are widely recognized, but the

nature of the relationship and the influence of situational

and individual variables remain unexplored. Nonetheless,

it is logical to expect the superior's leadership style to

be significantly related to the subordinate's performance

56

evaluation practices. The leadership style of the superior

serves to communicate role expectations to the subordinate.

Also, the performance evaluation practices of the

subordinate are a part of the subordinate's performance.

Therefore, the superior has a direct influence on the

performance evaluation practices of the subordinate through

evaluation of the subordinate's performance evaluation

"performance" and an indirect influence on the

subordinate's performance evaluation practices through the

role expectations communicated through the superior's

leadership behavior.

Individuals who perceive their superior to be high on

initiation of structure are expected to be influenced

toward the more structured, formal system. Further, the

contagion effect [Hopwood, 1972] implies that the

subordinate is likely to exhibit the superior's leadership

style, again implying a relatively greater reliance on the

structured, formal system when the superior is highly

structured in leadership style. Conversely, individuals

who perceive their superior to be highly considerate are

more likely to perceive the ability to deviate from the

formal system without retribution. As such, the

individuals are more likely to use informal information

than in- situations where the superior is less considerate

toward individual needs. Thus, high (low) structure is

expected to influence both ATTITUDES and RUFI toward formal

57

(informal) information, whereas high (low) consideration is

expected to influence both ATTITUDES and RUFI toward

informal (formal) information.

Other Relationships Among Explanatory Variables

Previous discussions have focused on the relationships

among ATTITUDES and RUFI and each of the individually

oriented explanatory variables. Additional relationships

among the explanatory variables include: 1) LOCUS OF

CONTROL and ROLE STRESS, 2) LOCUS OF CONTROL and LEADERSHIP

STYLE, 3) and ROLE STRESS and LEADERSHIP STYLE.

"Strictly speaking, locus of control is more popularly

conceived as being a relatively stable characteristic which

endures over time and across situations" [Brownell, 1979;

p. 36, note 27]. As such, LOCUS OF CONTROL may not be

influenced by the other variables of interest, but is

likely to influence perceptions of both ROLE STRESS and

LEADERSHIP STYLE. Further, the role perspective adopted

suggests that superiors' LEADERSHIP STYLE may influence

perceived ROLE STRESS.

LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE

are of interest in this study on the presumption that each

influences ATTITUDES and RUFI. The determinants, or

causes, of LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP

STYLE are beyond the scope of the research, but the fact

58

that the three are related is relevant. Relationships

among LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE

are recognized in order to portray a more accurate research

model and to facilitate statistical analysis. Exclusion

of these "other" relationships in data analysis could lead

to distorted or incorrect conclusions involving ATTITUDES

and RUFI.

Variables of Interest: Summary

Of primary concern are the direct relationships

between the dependent variable, RUFI, and each of the four

individually-oriented explanatory variables: ATTITUDES,

LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE. RUFI

is expected to be influenced toward informal information by

relatively favorable ATTITUDES toward informal information,

relatively more internally-oriented individuals regarding

LOCUS OF CONTROL, low levels of ROLE STRESS, and

supervisors exhibiting highly considerate, low structure

LEADERSHIP STYLE. RUFI is expected to be influenced toward

formal information by relatively favorable ATTITUDES toward

formal information, relatively more externally-oriented

individuals regarding LOCUS OF CONTROL, high levels of ROLE

STRESS, and supervisors exhibiting highly structured, low

consideration LEADERSHIP STYLE.

There are a number of relationships among the

explanatory variables with the potential of indirectly

59

influencing RUFI. ATTITUDES may be affected by the three

other explanatory variables. In fact, the influence of the

explanatory (and other) variables on RUFI may be primarily

"through" ATTITUDES. Finally, the relationships among

LEADERSHIP STYLE, ROLE STRESS, and LOCUS OF CONTROL must be

recognized so that the direct and indirect effects of the

explanatory variables are not distorted.

Hypotheses

The following research hypotheses refer to the

independent, or predictor variables, and are based

primarily on the previous discussions. Five hypotheses are

needed to specify the direct relationships between the

predictor variables and RUFI because two dimensions of

LEADERSHIP STYLE are of interest. Stated in the alternate

form, the five hypotheses follow:

HI: When making performance related decisions,

relatively favorable attitudes toward

informal (formal) information will be

associated with relatively greater reliance

on informal (formal) information.

H2: Individuals who are relatively strong

internals rely relatively more on informal

information when making performance related

decisions.

60

H3: Individuals in a high state of role stress

rely relatively less on informal information

when making performance related decisions.

H4: Individuals who perceive their superior to

be relatively high in initiating structure

rely relatively less on informal information

when making performance related decisions.

H5: Individuals who perceive their superior to

be relatively high in consideration rely

relatively more on informal information when

making performance related decisions.

There are four additional hypotheses that pertain to

indirect relationships between the predictor variables and

RUFI. Again in the alternate form, the hypothesized

relationships among the predictor variables and ATTITUDES

follow:

H6: Individuals who are relatively strong

internals are likely to have relatively more

favorable attitudes toward informal

information.

H7: Individuals in a relatively low state of

role stress are likely to have relatively

more positive attitudes toward informal

information.

H8: Individuals who perceive their superior to

be relatively high in initiation of

61

structure are likely to have relatively more

positive attitudes toward formal information.

H9: Individuals who perceive their superior to

be relatively high in consideration are

likely to have relatively more positive

attitudes toward informal information.

Although not of interest as hypotheses, additional

relationships among the explanatory variables are

recognized. In similar positive, or alternate form, there

are three "assumed" relationships:

Rl: Locus of control and role stress are related.

R2: Locus of control and superiors' leadership

style are related.

R3: Role stress and superiors' leadership style

are related.

The Research Model

In the conceptual model of the relationships between

performance information, performance evaluation, and

performance related decisions (pay, promotion, and

termination), attitudes toward the informal information

were hypothesized to have a moderating effect on the

relationship between performance information and

performance evaluation (see Figure 3.2: Theoretical Model,

page 39). Previous discussions have supported similar

moderating effects of LOCUS OF CONTROL, ROLE STRESS, and

62

LEADERSHIP STYLE, and have suggested some additional

relationships among the variables. The direct

relationships between RUFI and each of the four explanatory

variables and the relationships between ATTITUDES and each

of the three other explanatory variables are stated as

hypotheses. The assumed relationships summarize additional

relationships among the explanatory variables.

Accordingly, the research model is now complete and

illustrated as Figure 3.3 (following page). Straight lines

between constructs indicate hypothesized relationships,

whereas curved lives represent assumed relationships.

63

ROLE STRESS

LOCUS OF

CONTROL

LEADERSHIP

STYLE

RUFI

Figure 3.3: Research Model

CHAPTER IV

RESEARCH METHODOLOGY

The purposes of this chapter are to: 1) explain the

research methodology, describe the research subjects, and

discuss the research instrument; and 2) provide a brief

description of the statistical technique applied.

Particular emphasis is placed on the development and

measurement of the dependent variable—RUFI.

A Two-Phase Field Study

The first phase of the study consisted of a series of

interviews to develop the research instrument. The

interview approach was desirable because of the "richness"

of information available, and to promote internal and

external validity. The second phase of the study involved

pretesting of the instrument to a sub-sample of managers

and administration of the questionnaire. The empirical

data for statistical analysis were gathered in phase two.

Both phases involved a non-laboratory setting and

neither phase involved the manipulation of variables.

Accordingly the research is appropriately classified as a

field study:

64

65

. . . ex post facto scientific inquiries aimed at discovering the relations and interactions among sociological, psychological, and educational variables in real social structures [Kerlinger, 1973; p. 405].

Phase one of the study was exploratory in nature whereas

phase two was hypothesis-testing.

Phase One: Development of the Instrument

Performance evaluation was not directly observable for

research purposes because of both the confidential and

legal nature of employment records. The proposed

explanatory variables involved individuals' attitudes and

perceptions. Thus, the need for confidential, individual

participation suggested the appropriateness of a

questionnaire as the primary data source.

Measurement of RUFI and ATTITUDES

Standardized measures were available for each of the

independent variables in the research model except

ATTITUDES. The dependent variable (RUFI) and the

independent variable ATTITUDES are unique to this study and

had to be developed. Early development of the instrument

included a number of interviews with a variety of subjects.

The interviews consisted of a series of open-ended

questions regarding the use of information in pay and

promotion decisions, desirable and undesirable attributes

of that information, and descriptions of the source(s) of

66

the data. A general schedule for the early interviews is

presented as Appendix A.

Participants in the developmental interviews were of

diverse backgrounds and represented a variety of

supervisory roles. Included were a general manager and a

personnel manager of a national retail organization, an

operations manager of an energy service company, a

commercial-lending officer, a public school superintendent,

and a number of university professors and graduate students

with various supervisory experience. Each of the interview

subjects currently or previously played a significant role

in the determination of merit pay increases, promotions,

and terminations of subordinates.

Three semantic issues became evident during the

initial interviews. First, the subjects tended to

interpret "performance evaluation" as the periodic coaching

and development exercise required (and documented) by the

formal system rather than as the "summative evaluation" of

interest in this study. The evaluations were done at

varying time intervals and provided part of the information

used in performance-related decision making. Thus, the

subjects perceived "performance evaluation" to mean what

the normative managerial literature refers to as

"performance appraisal," and were consistent with the

previously summarized surveys of current managerial

practice regarding differences in performance evaluation

67

for coaching purposes and performance evaluation for pay

and promotion decisions. Since the later was of primary

concern in this study, the ATTITUDES and RUFI sections of

the questionnaire referred to pay, promotion, and

termination decisions. Questions regarding periodic

performance evaluation (appraisal) were included, but the

responses were expected to vary significantly from those

regarding pay, promotion, and termination decisions since

the two were treated differently by interviewees.

The second semantic issue identified in the early

interviews concerned the terms formal and informal.

Neither term was understood by the subjects. All subjects,

however, could easily define or describe the "official"

system, and had no problem describing "official

information." Further, all subjects were able to describe

"other" informational influences on performance appraisals

and pay, promotion, and termination decisions. Given the

"official" vs "other" terminology, the subjects were able

to discuss their attitudes toward each, frequently

mentioning such attributes as confidentiality,

completeness, and accuracy. The subjects described a

variety of "other" (i.e., informal) informational

influences and systems used by themselves and other

organizational members. The descriptions ranged from

"opinions of others" to elaborately developed, fully

documented measurement systems. Thus, in the

68

questionnaire, "official" and "other" were used to

represent "formal" and "informal," respectively, and the

ATTITUDES questions addressed such attributes as

confidentiality, completeness, accuracy, and timeliness.

The third issue pertained to differences in the

authority of the manager in performance-related decision

making. Some of those interviewed indicated that they

could not actually make pay, promotion, or termination

decisions but that they did have the ability to

significantly influence the decisions. Thus, the dependent

variable questions were worded to include "suggest" as well

as "make" when referring to performance-related decisions.

Generally, the initial interview subjects were willing

and able to discuss their own performance evaluation

practices as well as their perceptions of the practices of

others. Some subjects were quite opinionated regarding the

evaluation of performance, openly criticizing the

"official" system. Other interviewees stressed the need

for standardization and formality. Practices seemed to

vary within organizations as much as among organizations,

strongly implying the existence of individual differences.

The Questionnaire

The questionnaire consisted of four parts (see

Appendix B), and measured five primary research variables.

Three of the five were established research instruments:

69

LOCUS OF CONTROL, LEADERSHIP STYLE, and ROLE STRESS. The

remaining two variables, ATTITUDES and RUFI, were unique to

this study. The content and wording of the latter two

variables were largely the result of the phase one

interviews. V7ith the exception of the demographic

information and a multiple choice description of the

informal information used, all items solicited seven-point

Likert-type responses. Following are brief descriptions of

the contents of each part.

Part One: Demographics. In part one, subjects were

to report their sex, age, level of education, years in

current position, and years with the company. Also, the

organizational function, or department, was requested and

each manager was asked to indicate a "pre-merger"

affiliation (see Pretesting for additional discussion of

this last item).

Part Two: RUFI and ATTITUDES. In order to develop

scores for RUFI and ATTITUDES, the subjects were asked to

respond to twelve Likert-type questions twice each, once

regarding the "official" information used in performance

related decision making, and once regarding the "other"

information used.

Double responses to four Likert-type questions (nine

through- twelve) constituted the basis for RUFI scores.

Perceptions regarding the extent of influence of both the

"official" and "other" information regarding merit pay

70

adjustments, promotions, terminations, and periodic

performance evaluations were recorded on seven-point

scales. Four indicants of the relative use of formal and

informal information are the differences between the

"official" and "other" responses. Since the "official"

responses were subtracted from the "other" responses in

computing the relative scores, positive scores indicated

greater reliance on informal than formal information.

Therefore, four indicants of RUFI were obtained along a

continuum of scores from negative six (total reliance on

the "official" information) to positive six (total reliance

on the "other" information).

The first eight (numbered) questions in part two

solicited qualitative judgments regarding the accuracy,

completeness, ease of use, extent of detail,

understandability, confidentiality, timeliness, and

quantitative/qualitative nature of the information.

Responses to these eight questions were presumed to be

indicative of the subjects' general attitudes toward both

the formal and the informal information.

An additional question was included in part two in

order to provide a validity check on the formal versus

informal distinction and to aid in interpretation of the

results. A general description of the "other" information

used was obtained using a multiple choice format (first

question, not numbered). The alternatives provided were

71

developed from the phase one interviews and ranged from "an

organized, documented set of records, memos, or other data"

to "unwritten advice and/or memory." Also, a "none of the

above (please specify)" option was available.

Part Three: ROLE STRESS and LOCUS OF CONTROL.

Fourteen questions addressed ROLE STRESS and were from

Rizzo, House, and Lirtzman [1970]. Eight of the fourteen

referred to role conflict, whereas the remaining six

addressed role ambiguity. The Rizzo, House, and Lirtzman

scale has been widely applied and generally supported in

the literature [Van Sell, Brief, and Schuler, 1981]. The

remaining fifteen items in part three assessed LOCUS OF

CONTROL.

Robinson and Shaver [1973] report that most

researchers have applied the 58-item (29 pair), forced

choice format instrument developed by Rotter [1966] and

Lefcourt [1966, 1972] in measuring locus of control.

Collins [1974] converted the scale to a 58-item Likert-type

instrument in order to avoid the forced choice format and

to facilitate factor analysis. From the analysis reported

by Collins, fifteen questions were identified as

particularly significant. These fifteen items were the

LOCUS OF CONTROL questions in part three of the

questionnaire. An experiment using 234 undergraduate

business students of a large university in the southwest

supported the validity of the abbreviated instrument

72

[McGill and Johnson, 1986]. The fifteen item "LOC short"

scale produced scores that correlated strongly with scores

on the Rotter "LOC long" instrument (.63). Further, LOC

short was found to have a test-retest reliability of .81

and an alpha coefficient of .80.

Part Four: LEADERSHIP STYLE. The questions used to

measure LEADERSHIP STYLE were taken directly from the LBDQ

Manual [Stodgill, 1963]. Korman [1966, p. 349] noted the

significance of the leadership research program conducted

at The Ohio State University recognizing that "the most

important contribution was isolation of "Consideration" and

"Initiating Structure" as basic dimensions of leadership

behavior in the formal organization." The LBDQ instrument

was used in this study because it provides a measure of

subordinates' perceptions of superiors' leadership style

and since the instrument has been used in similar studies

of information usage in performance evaluation [Hopwood,

1972; 1974]. Perceptions of superiors' leadership

behavior, particularly along the structure and

consideration dimensions, evidence role-related

expectations of salient others. Thus, the LBDQ measurement

of the two dimensions was consistent with the role

perspective adopted in this research. Ten seven-point

Likert-type responses gathered perceptions of the

superiors' considerate behavior (CONSIDERATION). Ten

others measured initiation of structure (STRUCTURE).

73

Phase Two: A Single-Entity Sample

Variation in RUFI may be influenced by a number of

factors. In order to concentrate on individually-oriented,

intraorganizational influences, the empirical data were

from within a single operational department in a single

entity. A single-entity study was consistent with the role

perspective previously discussed and was designed to

eliminate the variance attributable to interorganizational

factors. Further, the sample population was restricted to

operations management in order to reduce variation in job

design as much as possible.

The population sampled was operations management of

the transportation division in the subject entity—a

Fortune 100 company involved primarily in transportation

and energy. All of the managers were line managers (as

opposed to staff managers) and all were core managers in

that each had limited contact with external parties. Each

manager had at least one subordinate, thus was presumed to

have input in performance related decision making. The

subordinates were either other managers or non-managers

responsible for the construction, maintenance, and/or

operation of equipment and facilities used in the

transportation of goods. Managers in support groups

(accounting, personnel, purchasing, etc.), top (executive)

management, and marketing were not represented. Thus, the

managers and the subordinates constituted two fairly

74

homogenous groups with reasonably similar job designs.

Approximately 500 managers constituted the population. Of

the managers, 279 were randomly selected to participate as

research subjects. A convenience sample of seven other

managers was made available to participate in pretesting

the questionnaire.

Pretesting

Pretesting interviews were more structured than the

phase one interviews in that administration of the entire

questionnaire preceded general discussion and specific

questioning regarding the instrument. Also, all of the

subjects involved in the pretesting were from the

population to be sampled by questionnaire. Seven managers

of a local facility of the subject entity participated in

pretesting interviews.

Generally, the subjects required no assistance other

than a brief introduction, completed the questionnaire in

less than fifteen minutes, and made few specific comments.

However, several of the participants suggested that the

responses might differ between two distinguishable elements

in the organization. Recent merger activity resulted in an

organization consisting of two operating factions, each

still relatively independent, with geographical and other

distinctions. The pretest subjects suggested that the

identification of responses by "pre-merger affiliation"

75

might provide information useful in understanding variation

in RUFI within the research entity. Accordingly, a final

question was added to part one of the questionnaire in

order to enable analysis by operating faction.

Distribution and Response

The names and addresses of 279 managers were provided

by the research contact, the senior operations executive of

the research entity. The sample was stratified in that 219

of the managers were mid-to-low-level managers of

decentralized operations throughout the central and western

U.S., whereas 60 of the managers were mid-to-upper-level

managers of operations at the subject entity's

headquarters. Initial mailings to each subject included

the questionnaire, a stamped return envelope, and a letter

of introduction from the senior operating executive. The

letter described the study and encouraged participation.

The packages were sent to the subjects' homes with the

request that the completed questionnaires be returned

directly to the researcher.

Approximately two weeks after the initial mailings,

second requests for participation were sent to all

non-responding subjects. For the second mailings, a letter

from the researcher accompanied the questionnaire and

return envelope. The initial mailings were referred to,

and particular emphasis was placed on contacting the

76

researcher by telephone to discuss any reservations or

interpretational problems.

Of the 279 subjects selected, 207 responses were

received for an overall response rate of 74 per cent, six

of the responses were unusable because the RUFI questions

were not answered ("usable" response rate of 72%). The

sample was almost entirely male (99%) . Only 6 percent of

the managers selected were less than 31 years of age. 98

percent of the subjects had completed high school, 67

percent reported some college, and 34 percent were college

graduates. Approximately one third of the subjects were

occupying positions they had held for two years or less and

an additional third reported only three to four years in

their current position. Half of the managers had been

affiliated with the subject company in excess of fifteen

years (26% in excess of 26 years) whereas only five percent

had been with the company five years or less. Except for

the exceptionally low number of female participants, the

demographic information appeared to provide a reasonable

profile of mid-to-low level business managers.

Although always an issue with self-report data, there

was no indication of non-response bias. Table 4.1

(following page) reports the results of tests of

differences in the means of the research variables between

those who returned the first questionnaire and those who

returned the second.

Table 4.1: Non-Response Bias Test Results

77

Test F-stat PR > F

Wilks' Criterion 1.17 .2607

L = .80117227

Pillai's Trace 1.17 .2607

V = .19882773

Hotelling-Lawley Trace 1.17 .2607

Trace = .24817101

Roy's Maximum Root Criterion 1.17 .2607

Criterion = .24817101

78

Based on the premise that those who respond to

subsequent requests are similar to those who do not respond

[Pace, 1939; Armstrong, 1977], the lack of significant

differences indicates that non-response bias is not a

significant issue.

Statistical Analysis - LISREL

Since the research addressed a number of latent

(unobservable) constructs, data analysis techniques of

factor analysis and structural equation models were both

desired. The statistical technique chosen is the

covariance structure modeling technique available through

the program LISREL [Joreskog and Sorbom, 1985]. Sujan

[1986, pg. 45] noted an advantage of LISREL over

traditional regression techniques that is particularly

relevant to this research: "(H)ypotheses can be tested in

the context of other relationships."

Several strengths of LISREL were noted by Bagozzi

[1980; p. 107]:

1. The general linear model is a comprehensive scheme for representing all of the elements and relationships of a theory in a single structure.

2. The general linear model provides one with direct measures of the degree to which theoretical constructs are related, the extent of errors in equations and variables, and the relationships between constructs and operationalizations.

79

I

3. Since the approach is a maximum likelihood procedure, parameter estimates are independent of scales of measurement for the variables in the model.

4. LISREL provides a test statistic for one's entire model.

5. Finally, as Burt [1973] indicates, maximum likelihood estimates from procedures such as LISREL are "optimally efficient . . . over variable sample sizes" and are "robust over nonnormality."

Several limitations, or assumptions, of LISREL were

noted also by Bagozzi: The data are assumed to be interval

scaled, functional relationships among variables are

assumed to be linear, the observations are assumed to be

from a multivariate normal distribution, and specific

hypotheses must be substantially supported a, priori.

An Introduction to LISREL

The LISREL model was introduced by Joreskog [1973] and

has been applied in a variety of research appearing in

journals of psychology, sociology, econometrics, and

various other social sciences. Generally, the LISREL

computer program uses maximum likelihood procedures to

estimate the unknown coefficients in a set of linear

equations. "The program is particularly designed to handle

models with latent variables, measurement errors, and

reciprocal causation (simultaneity, interdependence)"

[Joreskog and Sorbom, 1985, p. 1.2].

80

The LISREL model consists of a measurement model that

specifies how each of the latent (unobservable) constructs

relate to the observed variables, and a structural model

that specifies the relationships among the latent

constructs (including causation). Using either raw input

or a matrix of the relationships between the observed

variables, the program is able to generate maximum

likelihood estimates of the parameters in the model, such

as the strengths of the relationships among the latent

variables, the measurement errors, and the modeling error.

Application of LISREL requires an a_ priori specification j

of the relationships among the variables. j

Model Specification

Figure 4.1 (next page) is an illustration of the

LISREL_model applied in this research. The LISREL model is

an extension of the previously specified research model.

Two dimensions of both LEADERSHIP and ATTITUDES are

presented so that all of the hypothesized relationships can

be studied. Also, a number of additional variables and

relationships are illustrated to reflect the observed

variables and their relationships with the latent

constructs (i.e., measurement). Generally, the straight

lines indicate causal relationships v/hereas the curved

lines recognize relationships without specifying causality.

81

Figure 4.1: The LISREL Model

82

In LISREL terminology (summarized in Figure 4.2,

following page), the model consists of six latent variables

(the research variables of interest) and a number of

observable variables. Four of the latent variables

(STRESS, LOCUS OF CONTROL, CONSIDERATION, and STRUCTURE)

are referred to as exogenous (xi) variables since they are

presumed not to be "caused" by other latent variables in

the model. ATTITUDES and RUFI are endogenous (eta) since

they are depicted as being "caused" by other latent

variables in the model. The direct causal effects among

endogenous variables are referred to as "beta's", and the

direct causal effects of the exogenous variables on the

endogenous variables are called "gamma's." Correlational

relationships among the exogenous variables are referred to

as "phi's." The "zeta's" represent influence on the

endogenous variables not explained ("modeling" error).

The observed variables are referred to as either "x"

variables, which are indicants of the exogenous variables,

or "y" variables, which are indicants of the endogenous

variables. "Lambda-x" denotes a relationship between an

"x" variable and a exogenous variable, whereas "lambda-y"

denotes a relationship between a "y" variable and an

endogenous variable. Errors in measuring x's are "delta's"

and errors in measuring y's are "epsilon's." The x's and

y's can be single indicators of the latent construct or

83 Terms - General:

V

y x p q m n

(eta) - a latent endogenous variable (xi) - a latent exogenous variable

- an observed indicator of an endogenous variable - an observed indicator of an exogenous variable - the number of y-variables - the number of x-variables - the number of ^-variables - the number of I-variables

Terms - Specific:

"fl V2 !!3 h h h ^4 yl -y9 -yl7 • xl -x6 -x8 -xlO •

y8 yl6 - y20 x5 x7 x9 - xl2

ATTITUDES ATTITUDES RUFI LOCUS STRUCTURE CONSIDERATION STRESS indicators of indicators of indicators of factor scores factor scores factor scores factor scores

(formal) (informal)

(formal) (informal)

ATTITUDES ATTITUDES RUFI for LOCUS for STRUCTURE for CONSIDERATION for STRESS

Parameter Matrices:

Ay (Lambda-Y)

Ax (Lambda-X)

B (Beta)

r (Gamma)

* (Phi)

^ (Psi)

Be (Theta-Epsilon)

65 (Theta-Delta)

- a pxm matrix of the relationships among y's and v 's

- a qxn matrix of the relationships among x's and ^ 's

- an mxm matrix of the relationships among the V 's

- an mxn matrix of the relationships among the ^'s and the V 's

- an nxn matrix of the relationships among the ^'s

- an mxm matrix of the relationships among the ^'s error terms (f's)

- a pxp matrix of the relationships among the y's error terms (c's)

- a qxq matrix of the relationships among the x's error terms (6's)

Figure 4.2: LISREL Notation

84

factor or composite scores representing a number of

indicators. In the model presented, xl through x5 are

factor scores for LOCUS OF CONTROL, x6 and x7 are factor

scores for STRUCTURE, x8 and x9 are factor scores for

CONSIDERATION, and xlO through xl2 are factor scores for

STRESS. Responses to the ATTITUDES items were used to

measure ATTITUDES (formal) (yl to y8) and ATTITUDES

(informal) (y9 to yl6). Four relative scores (yl7 to y20)

measure RUFI.

From the model, and using the LISREL terminology, it

is now possible to present equations for the structural and

measurement models. Figure 4.3 (following page) presents

both the general forms for the equations and the equations

specific to this research.

85

Structural Equations:

General: v = Bri + T^ r Spe c i :

' ' ' I T?2

^ 3

f i e :

=

0 i821 1831

0 0 1832

0 0 0

' ' I r?2

^ 3

n i '^12 ^13 " 14 "^21 ^ 22 ' 23 " 24 ') 31 ^ 32 '^33 " 34

Measurement Equations

General:

Specific:

and

x l x2 x 3 x4 x 5 x6 x 7 x 8 x9 XlO x l l x l 2

=

yl y2 y3 y4 y5 y6 y7 y8 y9 ylO yll yl2 yl3 yl4 yl5 yl6 yl7 yl8 yl9 y20

r i «2 | 3

[h

+ f l h !-3

U mJ

Ax^ + 5 and

X l l ^ 2 1 ^ 3 1 X4I

X51 0 0 0 0 0 0 0

"Xl l X21 X31 M l X51 ^ 6 1 X71 X81 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 ^ 6 2 X72 0 0 0 0 0

0 0 0 0 0 0 0 0 X 9 , : X l O , X l l , X12 . X l 3 , Xl4< Xl5< XI6 0 0 0 0

0 0 0 0 0 0 0 M Xc 0 0 0

>

2 2 2

,2 ,2 r2 r2

13 )3

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 X l O , 4 X l l , 4 X l 2 , 4 j

"

X l 7 , 3 X l 8 , 3 X l 9 , 3 X20,3

r-

1

Ay'?

— —.

?l| h «3 h

+

•J

+ c

\ '

h h 64 55 56 57 58 69 5lO 5 l l 6 l2

''I '?2 ^3

^1 «2 «3 U «5 «6 «7 «8 '9 «10 *11 n2 «13 «14 15 ^6 «17 «18 «19 20

Figure 4.3: LISREL Equations

CHAPTER V

EMPIRICAL RESULTS

The primary statistical technique applied in analyzing

the questionnaire data was introduced in the previous

chapter. The purpose of this chapter is to report the

results of that analysis. Before discussing the fit of the

LISREL model and reporting the results of the tests of

hypotheses, a discussion of the steps taken to validate the

research constructs is provided and the results of tests of

significance of the demographic and other potentially

useful variables are provided.

Verification of the Research Constructs

Tests of validity were performed on the three

established research constructs (LOCUS OF CONTROL, ROLE

STRESS, and LEADERSHIP STYLE). Extended analyses were

afforded the two variables unique to this research—the

explanatory variable, ATTITUDES, and the dependent

variable, RUFI. Simple descriptive statistics for the RUFI

questions are presented in Table 5.1 (following page).

86

87

Table 5.1: Responses to RUFI Items

Variable (Dimension) Mean Standard Deviation

1.

1.

1.

1.

.80

.59

.92

.51

RUFIl: Pay Adjustments

RUFI2: Promotions

RUFI3: Terminations

RUFI4: Appraisals

.42

.65

.32

.29

88

The Relative Use of Formal and Informal Information

The range of scores possible for each of the four

indicants of RUFI (RUFIl, RUFI2, RUFI3, and RUFI4) was -6

(total reliance on formal information) to +6 (total

reliance on informal information). RUFIl and RUFI2 ranged

from -5 to +6, RUFI3 varied over the entire range, and

RUFI4 ranged from -5 to +5. Mean scores for each of the

four were positive (.42, .65, .33, and .29, respectively),

indicating that the subjects perceived greater reliance on

the informal information than on the formal information in

all four performance-related decision situations: pay

(RUFIl), promotion (RUFI2), termination (RUFI3), and

periodic evaluation (RUFI4). T-tests for differences in

means indicated significant differences (alpha < .05)

between formal and informal system responses for each of

the four items (see Table 5.2, following page). Also,

significant positive correlations among the four scores

supported the premise of a common underlying source of

variation (see Table 5.3, page 90).

Two additional analyses provided additional support

for the use of RUFI as a research construct. First, factor

analysis of the RUFI scores suggested the use of a single

factor. The first extracted factor using the principal

components method was able to explain over 70% of the

89

Table 5.2: Tests For Differences in RUFI Responses

Mean Std. Dimension Diff. Error T PR > T

Pay Adjustments

Promotions

Terminations

Appraisals

. 4 2

. 6 5

. 3 2

. 29

. 1 3

. 1 1

.14

. 1 1

3 . 2 9

5 . 7 8

2 . 3 9

2 . 6 8

. 0 0 1 2 * *

. 0 0 0 1 * * *

. 0 1 7 8 *

. 0 0 7 9 * *

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level

90

Table 5.3: Correlations Among RUFI Responses

Dimension: Pay Adjustments Promotions Terminations

Pay Adjustments

Promotions

Terminations

Appraisals

1.00

.72

.59

.63

1.00

53

62

1.00

.54

91

variance (eigenvalue of 2.84), whereas the remaining

factors were each able to explain less than 13% of the

variance (eigenvalues less than .5). The minimum promax

rotated factor loading on the single factor was .79 and the

minimum communality estimate was .62. Second, a

reliability analysis supported the use of RUFI as a

measurement scale. The calculated reliability coefficient

(alpha) of .86 would have decreased slightly if any of the

four scores were deleted. Thus, the four scores seemed to

produce a reasonably accurate and reliable measurement of

the construct RUFI.

As indicated in the previous chapter, an additional

item was included in the questionnaire to provide a

validity check on the formal/informal distinction and to

facilitate interpretation. A multiple choice question

solicited subjects' descriptions of the informal

information relied on in performance-related decision

making. Eleven subjects (5.5%) did not respond to the

question and no "other" responses were provided. Of those

responding, 74% described the informal information as "some

combination of documentation, advice, and memory" (response

C). An additional 17% of the subjects reported the use of

"an organized, documented set of records, memos, or other

data" (response A). Responses B, "a loose collection of

documentation," and D, "unwritten advice and/or memory,"

comprised the remaining 9%. Thus, more than 90% of the

92

managers indicated that at least some of the informal

information was documented (response A, B, or C) , and

almost 80% of the managers included "advice and/or memory"

(responses C or D). Additional information descriptive of

both the formal and the informal information was available

in the responses to the ATTITUDES questions.

Attitudes Toward Formal and Informal Information

Table 5.4 (following page) contains descriptive

statistics for each of the sixteen ATTITUDES items (AFl to

AF8 for formal. All to AI8 for informal). The eight

questions referred to accuracy, completeness, ease of use,

extent of detail, understanding, confidentiality,

timeliness, and quantitative/qualitative nature of the

information, respectively. Mean scores for all but one of

the fourteen responses were above the scale midpoint of 4.

Suggested was that both the formal and the informal

information were perceived to be accurate, complete, easily

usable, understood, and timely. Also suggested were that

both types of information were more "words" than "numbers"

(AF8, AI8) and that both were closer to "excessive" than

"little" in detail provided (AF4, AI4). Finally, the mean

responses to the confidentiality question were above the

midpoint for the informal information (AI6) but below the

midpoint for the formal information (AF6).

Table 5.4: Responses to ATTITUDES Items

Formal Informal

93

Dimension Mean S. D Mean S. D

Al: Accurate

A2: Complete

A3: Easy to Use

A4: Detailed

A5: Understandable

A6: Confidential

A7: Timely

A8: Qualitative

5 . 0 6

4 . 8 7

4 . 8 8

4 . 6 4

! 5 . 1 3

3 . 5 4

4 . 2 5

4 . 3 7

1 .27

1 .33

1 .64

1 .43

1 .37

1.69

1 .72

1 .37

5 . 0 8

4 . 9 3

5 . 3 7

4 . 4 7

5 . 7 2

4 . 4 5

5 . 0 7

4 . 6 8

1.14

1 .13

1.39

1 .21

1.13

1 .75

1.36

1.19

94

The ATTITUDES responses were also interpretable on a

relative basis, providing some indication of the subjects'

conceptualizations of both the formal and the informal

information. All but one of the mean relative ATTITUDES

scores (RELATl to RELAT8) were positive. Suggested was

that informal information was more accurate, more complete,

more easily usable, less detailed, better understood,

more timely, more confidential, and more qualitative than

the formal information. However, t-tests for differences

in mean responses to each of the eight pairs of ATTITUDES

items indicated that not all of the suggested relationships

were significant (see Table 5.5, following page). Five of

the eight pairs of responses differed significantly (less

than .01); whereas three of the pairs did not (min. of

.17). Formal responses were significantly different from

informal responses for ease of use, understanding,

confidentiality, timeliness, and quantitative/qualitative

nature of the information. Perceptions of accuracy,

completeness, and extent of detail did not significantly

vary.

Factor analysis of the sixteen ATTITUDES responses

supported both a common theme throughout the sixteen and a

formal/informal distinction. The first two extracted

factors"(principal components) had eigenvalues of 5.3 and

1.9, respectively, and together explained over 45 per cent

of the variance. No other factors explained as much as 10

Table 5.5: Tests for Differences in ATTITUDES Responses

95

Dimension Mean Std. Diff. Error PR > T

Al: Accurate

A2: Complete

A3: Easy to Use

A4: Detailed

A5: Understandable

A6: Confidential

A7: Timely

A8: Qualitative

02

06

49

17

59

91

82

31

.10

.10

.11

.12

.09

.13

.12

.11

.26

.58

4.43

1.37

6.36

7.27

6.77

2.82

.7948

.5659

.0001***

.1713

.0001***

.0001***

.0001***

.0052**

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level

96

percent of the variance. Prior to rotation, 15 of the 16

variables loaded most heavily on the first factor (all

positive), and the second factor consisted of only negative

loadings for the formal items and only positive loadings

for the informal items (see Table 5.6, following page).

Promax rotated factors emphasized the distinction since all

eight of the formal responses loaded more heavily on the

first factor than on the second and all eight of the

informal responses loaded more heavily on the second factor

(see Table 5.7, page 98).

In the LISREL model the two sets of eight responses

(formal and informal) were used as indicators of two

closely-related latent constructs—ATTITUDES (formal) and

ATTITUDES (informal).

Role Stress

Mean responses to the individual STRESS items ranged

from 2.65 to 5.02 with standard deviations of approximately

2. The 14-item scale produced a reliability coefficient

(alpha) of .83, a grand mean of 3.86, and a mean aggregate

score of 54 on a scale from 0 to 98 (standard deviation of

14). Thus, even though a significant amount of variation

was evident, the overall level of role stress perceived by

the subjects was only slightly above the midpoint, and the

scale appeared to produce a reliable measure of an

underlying construct. These results seem to be comparable

97

Table 5.6: Initial Factor Loadings: ATTI TUDES

Source

Formal

Dimension

AFl: Accurate

AF2: Complete

AF3: Easy to Use

AF4: Detailed

AF5: Understandable

AF6: Confidential

AF7: Timely

AF8: Qualitative

First Factor

,68444

17258

61525

33530

Second Factor

.67314 -.44712

.69153 -.49501

.65399 -.38384

51393 -.33465

-.26342

-.10038

-.32301

-.24041

Informal

All: Accurate

AI2: Complete

AI3: Easy to Use

AI4: Detailed

AI5: Understandable

66498

65304

67764

58504

67902

.29753

.31906

.37850

.42760

.39805

AI6: Confidential

AI7: Timely

AI8: Qualitative

20838

62884

37842

.33876

.41585

.07405

Eigenvalue 5.32561 1.91390

Percent Explained .3329 .1196

98

Table 5.7: Promax Rotated Factor Loadings: ATTITUDES

First Second

Source Dimension Factor Factor

AFl: Accurate .80740 .32661

AF2: Complete .84795 .31633

AF3: Easy to Use .75824 .34453

Formal AF4: Detailed .61296 .25298

AF5: Understandable .72188 .43502

AF6: Confidential .19961 .09141

AF7: Timely .69358 .34463

AF8: Qualitative .41135 .15316

All: Accurate .41458 .72057

AI2: Complete .39321 .72210

AI3: Easy to Use .38346 .77483

Informal AI4: Detailed .27881 .72322

AI5: Understandable .37451 .78652

AI6: Confidential .00269 .35796

AI7: Timely .32237 .75381

AI8: Qualitative .29852 .36958

99

with other studies of role stress in organizations

reporting "moderate" levels of stress. For example,

Collins, Seller, and Clancy [1984] report mean stress

scores ranging from 2.32 to 5.00 (1 to 6 scale) and

Collins, Anderson, and White [1984] report mean scores

ranging from 2.22 to 6.62 (1 to 7 scale). Similarly,

Collins and Johnson [1986] report grand means of 2.22 (1 to

5 scale) and Collins and Munter [1986] report grand means

of 2.89 (1 to 5 scale).

Locus of Control and Leadership Style

Since LOCUS OF CONTROL and LEADERSHIP STYLE were

established research constructs, minimal verification

efforts were necessary. Reliability coefficients (alpha's)

were calculated for the 15-item LOCUS OF CONTROL scale, the

10-item STRUCTURE scale and the 10-item CONSIDERATION

scale. The resulting reliability coefficients were .84 for

the LOCUS OF CONTROL scale, .90 for the STRUCTURE scale,

and .91 for the CONSIDERATION scale.

Also, factor analyses were performed on the LOCUS OF

CONTROL, STRUCTURE, and CONSIDERATION scores. In model

fitting and hypotheses testing efforts, promax rotated

factor scores for the three variables (and STRESS) were

used instead of individual item responses. The use of

factor scores simplified the structure and reduced computer

time and space requirements. Three ROLE STRESS factors,

100

five LOCUS OF CONTROL factors, two STRUCTURE factors, and

two CONSIDERATION factors were selected and rotated

(promax). Twelve factor scores were produced for each

subject. A covariance matrix of the sixteen ATTITUDES

responses, the four RUFI scores, and the twelve factor

scores was used as LISREL input.

Demographics and Other Potential Explanatory Variables

Each of the managers were asked to provide their sex,

age, highest level of education attained (education),

length of time in their current position (position), length

of time with the company (career) , operating department

(department), and "pre-merger" affiliation (faction).

There was an insufficient number of female subjects to

allow meaningful analysis of the demographic variable sex.

The influence of the other demographic variables (age,

education, position, and career) was assessed using an

expanded LISREL model. None of the demographic variables

were found to be significant. Appendix C contains a more

complete description of the expanded model and the

analysis.

Table 5.8 (following page) reports the results of

multivariate tests for differences in the means of the

research variables by department. Table 5.9 (page 102)

reports the results of similar tests for differences by

w

Table 5.8: Tests for Differences by Department

101

Test F-stat PR > F

Wilks' Criterion 1.12 2254

L = .52451467

Pillai's Trace 1.13 .2160

V = .57765131

Hotelling-Lawley Trace

Trace = .72447895

Roy's Maximum Root Criterion

Criterion = .31808725

1.11 2353

1.50 (upper bound)

102

Table 5.9: Tests for Differences by Facti on

Test F-stat PR > F

Wilks' Criterion .90 .6207

L = .83943998

Pillai's Trace .90 .6207

V = .16056002

Hotelling-Lawley Trace .90 .6207

Trace = .19127039

Roy's Maximum Root Criterion .90 .6207

Criterion = .19127039

103

faction ("pre-merger" affiliation). Neither department nor

faction was associated with significant differences. Thus,

none of the demographic or other variables were included as

LISREL input for hypothesis testing. Further, the lack of

significant differences in the responses by department

supports the contention of homogeneity in job design

throughout the population sampled.

Testing Hypotheses with LISREL

Tests of hypotheses with LISREL consist of comparing

the goodness of fit of one model to that of another. The

null hypothesis of no significant differences between the

overall fit of the two models is rejected when the change

in degrees of freedom is accompanied by a significant

change in the Chi-square statistic for the total model.

The two models must be subsets of a larger model, and must

differ by the inclusion (or exclusion) of the

relationship(s) being tested. The procedure outlined was

suggested by Bentler and Bonnet [1980] , and supported with

Monte Carlo evidence of the asymptotic independence of

sequential Chi-square difference tests by Steiger, Shapiro,

and Browne [1985]. In essence the tests examine whether

the addition (or deletion) of the hypothesized

relationship(s) significantly improves the fit of the model

to the data.

104

The LISREL model that served as a basis for testing

the research hypotheses was presented near the end of the

previous chapter (Figure 4.1, page 81). All models used in

testing the research hypotheses were "nested" in that

model, thus any two could be "compared" using the change in

the degrees of freedom and the change in the Chi-square

statistic. Previous discussions in this and the previous

chapters have explained how the data were obtained and

prepared for input. Selected LISREL output from the "null"

model (i.e., no explanatory variable influence) is

presented in Appendix D. Appendix E contains similar data

except that ATTITUDES (formal and informal) were modeled as

having causal influence on RUFI. Comparison of these two

models serves to illustrate hypothesis testing with LISREL

while testing the first research hypothesis—ATTITUDES are

related to RUFI.

The model examined in Appendix D (the null model) has

458 degrees of freedom and a Chi-square statistic of

985.32. The Appendix E model has 3 fewer degrees of

freedom and a Chi-square of 882.03. Since the change in

the Chi-square of 103.29 is larger than the critical

Chi-square value at a .05 level of significance and 3

degrees of freedom (7.8), the null hypothesis of no

difference between the two models was rejected. A

significant part of the variation in RUFI was explained by

variation in ATTITUDES.

105

Tests of Hypotheses

To test hypotheses 2 through 5, each of the

explanatory variables (other than ATTITUDES) were depicted

as having a direct influence on RUFI in addition to the

influence of ATTITUDES. LOCUS, STRUCTURE, CONSIDERATION,

and STRESS were each tested for direct influence on RUFI

individually and without the indirect influence of any of

the four on RUFI through ATTITUDES. The only difference

between the two models compared for each test was the

"freedom" of the parameter representing the direct

relationship between the explanatory variable being tested

and RUFI. In each case the "null" model for the tests of

direct effects was the Appendix E model. The results of

the tests of hypotheses 2 through 5 are presented in Table

5.10 (following page). With ATTITUDES in the model, none

of the direct effects of the remaining explanatory

variables of interest on RUFI were able to significantly

contribute to the fit of the model. Thus, null hypotheses

2 through 5 could not be rejected. The alternate

hypotheses of direct effects on RUFI were not supported so

were not reflected in subsequent models.

The same procedure was used to test hypotheses 6

through 9 except that tv70 parameters were involved in each

test. Since ATTITUDES were modeled as two endogenous

variables, two parameters differed from the Appendix E

106

Table 5.10: Tests of Direct Hypotheses

Chi-Model Square Diff. D.F

Base: 882.03 - 455 Includes ATTITUDES-RUFI

Base plus LOCUS-RUFI 880.85 1.18 454

Base plus STRESS-RUFI 880.70 1.33 454

Base plus STRUCTURE-RUFI 881.11 .92 454

Base plus CONSIDERATION-RUFI 880.94 1.09 454

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level

107

model for each test. The results of the tests are

presented in Table 5.11 (following page). With the

relationships among ATTITUDES and RUFI recognized in the

model, and without the direct influences of LOCUS,

STRUCTURE, CONSIDERATION, and STRESS on RUFI, any one of

the four latter variables was able to contribute

significantly to the overall fit of the model by explaining

part of the variation in RUFI through ATTITUDES. Rejection

of null hypotheses 6 through 9 was supported, however,

additional testing was necessary to substantiate the

suggested relationships.

Sequential tests of contribution to the model fit

were performed to more rigorously test hypotheses 6, 8, and

9. The sequential testing procedure differed from what has

been described only in that the most significant single

contributor to the model was retained each time all

candidates were tested. In the initial testing of indirect

explanation of variation in RUFI through ATTITUDES

(hypotheses 6 through 9), the most significant improvement

was provided by the addition of the STRESS to ATTITUDES

link. Thus, the STRESS to ATTITUDES link was reflected in

the model for subsequent hypothesis-testing "rounds." The

associated null hypothesis (7) could not be rejected,

however, because the direction of the relationship was the

reverse of that hypothesized. Next, the influence of each

108

Table 5.11: Preliminary Tests of Indirect Hypotheses

Chi-Model Square Diff. D.F

Base: 882.03 - 455 Includes ATTITUDES-RUFI

Base plus LOCUS-ATTITUDES 855.23 26.80*** 453

Base plus STRESS-ATTITUDES 848.00 34.03*** 453

Base plus STRUCTURE-ATTITUDES 852.76 29.27*** 453

Base plus CONSIDERATION-ATTITUDES 857.84 24.19*** 453

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level

109

of the remaining explanatory variables (LOCUS, STRUCTURE,

and CONSIDERATION) on RUFI through ATTITUDES was tested

individually. The results of the sequential tests of

hypotheses 6 through 9 are presented in Table 5.12

(following page). With the influence of STRESS and

ATTITUDES in the model, LOCUS, STRUCTURE, and CONSIDERATION

were not able to contribute significantly to the fit.

Thus, null hypotheses 6, 8, and 9 could not be rejected.

Stress as an Endogenous Variable: A Fitted Model

Recognizing that LOCUS, STRUCTURE, and CONSIDERATION

were potentially useful in explaining variation in STRESS

(thus RUFI), an additional model was tested in search of a

"best fit" LISREL model. STRESS, ATTITUDES, and RUFI were

modeled as endogenous, interrelated variables. Sequential

testing procedures were used to test for the contribution

of LOCUS, STRUCTURE, and CONSIDERATION through STRESS. All

three variables contributed significantly to the fit of the

model when considered on an individual basis. The largest

individual contribution was from LOCUS. Thus, LOCUS was

included in the model used to test STRUCTURE and

CONSIDERATION. Both STRUCTURE and CONSIDERATION were able

to contribute significantly to the model including LOCUS,

however CONSIDERATION was not able to improve the fit once

the more significant variable STRUCTURE was included.

110

Table 5.12: Sequential Tests of Indirect Hypotheses

Chi-Model square Diff. D.F

Base: 848.00 - 453 Includes ATTITUDES-RUFI, and STRESS-ATTITUDES.

Base plus LOCUS-ATTITUDES 844.90 3.10 451

Base plus STRUCTURE-ATTITUDES 846.02 1.98 451

Base plus CONSIDERATION-ATTITUDES 847.79 .21 451

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level

Ill

Thus, the "best fit" model includes all of the explanatory

variables of interest except CONSIDERATION. Selected

LISREL output for the fitted model is in Appendix F. The

total effects (direct and indirect) of each of the

explanatory variables of interest (provided as LISREL

output) are presented in Table 5.13 (following page).

Figure 5.1 (page 113) illustrates the variables and

relationships significant to the fitted model. The

implications of these findings and the results of the tests

of hypotheses are discussed in the following chapter.

112

Table 5.13: Total Effects: The Fitted Model

ATTITUDES ATTITUDES LOCUS STRUCTURE STRESS (formal) (informal)

STRESS -1.007 -.225

ATT.(form.) .687 .154 -.682

ATT.(inf.) .441 .099 -.438 .434

RUFI -.219 -.049 .217 -.565 1.192

113

LOCUS OF CONTROL

.-1.007

-.682

222 STRESS

-.141

-.225

STRUCTURE

ATTITUDES (formal)

.434

.

ATTITUDES (informal)

^1.083

RUFI

1.192

Figure 5.1: The Fitted Model

CHAPTER VI

SUMMARY AND CONCLUSIONS

This chapter includes: 1) a summary of the empirical

results, 2) discussions of the implications of the

findings, 3) a discussion of the limitations of the study,

and 4) some suggestions for future research.

Summary of Findings

The first of two research objectives was to examine

the extent to which informal information was relied upon

relative to formal information in performance-related

decision making. The data indicate that informal

information is relied upon relatively more than formal

information in all four of the performance-related decision

situations studied: pay, promotion, termination, and

periodic appraisal. Mean differences in the relative use

of formal and informal information ranged from .29 for

appraisals to .65 for promotions (scale of -6 to +6).

These results are consistent with the findings of Clancy

and Collins [1979] that "a strong majority, 79 per cent, of

the respondents maintained informal accounting information

systems" [p. 25], and with the observations of Dirsmith and

114

115

Covaleski [1985] that "(a)11 individuals concurred that

informal communication networks were much in evidence in

large public accounting firms" [p. 154, emphasis on

original]. The results are inconsistent with the findings

of Clancy and Collins that "the managers evaluated the

formal accounting system somewhat more highly than the

informal accounting system" [p. 25, emphasis on original],

and the conclusions of Dirsmith and Covaleski that

"informal communications . . . play a limited role in

informing organizational members of the politics and power

within the organization" [p. 149]. Neither study, however,

focused on the use of the informal information in

performance-related decision making.

In this study, the research subjects perceived the

informal information relied upon as "some combination of

documentation, advice, and memory" (74%). Both the formal

and the informal information relied upon were perceived to

be accurate, complete, and sufficiently detailed. The

informal information was perceived to be easier to use and

understand, more confidential, more timely, and more

qualitative than the formal information. Clancy and

Collins [1979] reported higher mean scores for formal than

informal on eight of thirteen measured attitudes. However,

the results are in disagreement only slightly. In both the

current study and the Clancy and Collins study, both the

formal and informal attitudes responses were generally

116

favorable. The data are in disagreement only regarding the

timeliness of the information. Clancy and Collins report

higher mean scores for ease of use and ability to

understand for informal information, and did not address

confidentiality or qualitative/quantitative nature.

The second research objective was to study the

relationships among a number of a priori explanatory

variables and the dependent variable of interest—RUFI.

Nine hypotheses were stated in order to specify the

relationships among RUFI and the explanatory variables of

interest—ATTITUDES, ROLE STRESS, STRUCTURE, CONSIDERATION,

and LOCUS OF CONTROL. Eight of the null hypotheses could

not be rejected. The hypothesized relationship between

ATTITUDES and RUFI is supported by the data. Also

supported is a significant relationship between ROLE STRESS

and ATTITUDES, but the data indicate that high ROLE STRESS

is associated with relatively favorable ATTITUDES toward

the informal information rather than toward the formal

information as hypothesized. Additionally, LOCUS OF

CONTROL and STRUCTURE were found to be useful in explaining

variation in ROLE STRESS. These relationships are

illustrated in model form at the end of the previous

chapter (Figure 5.1, page 113), and in the context of the

theoretical research model on the following page (Figure

6.1) .

117

Locus of Control

Role Stress Attitudes

Structure

Performance

Information

I

-•RUFI

I

Performance

Evaluation

Figure 6.1: The Research Model in Context

118

Generally, favorable attitudes toward the informal

information lead to relatively greater reliance on the

informal information, whereas relatively favorable

attitudes toward the formal information lead to relatively

less reliance on the informal information. STRESS is

negatively related to attitudes toward both formal and

informal information, but more negatively related to

attitudes toward the formal information. Thus, in a

relative sense, high stress leads to relatively favorable

attitudes toward the informal information. Finally,

perceptions of STRESS (high) are negatively related to

LOCUS OF CONTROL (external) and STRUCTURE (high).

Internals perceive more stress, and structured behavior of

the superior reduces stress.

The explanatory value of six additional variables was

also assessed. MANOVA was used to test for significant

differences in the variables of interest attributable to

departmental affiliation or "pre-merger" affiliation

(faction). LISREL was used to assess the usefulness of

four demographic variables: age, level of education,

length of time in current position, and length of time with

the research entity. The research variables did not

significantly vary by department or by faction, and the

demographic variables were not able to significantly

improve the fit of the LISREL model.

119

Implications of the Use of Informal Information

The relatively greater use of informal information

than formal information in performance-related decision

making suggests a discrepancy between the formally agreed

upon rules of governance in the organization and the true

system of rewards. Implied is a propensity for contractual

disputes, particularly when the formal system is intended

to assure legal compliance. Also implied are dysfunctional

consequences to the organization which may result from

conflicting or inaccurate "messages" regarding the

individuals' roles in the organization. In the extreme,

total use of informal information results in an

organization in which the organizational goals (as

reflected in the formal system) have no bearing on the

behaviors of the organizational members. Total reliance on

informal information, however, is unlikely.

The use of both formal and informal information in

performance-related decision making is consistent with a

markets and hierarchies perspective (see Chapter II). In

fact, the paradigm suggests a need for informal information

in order to compensate for the inadequacies of the formal

information. This complimentary relationship between the

formal and informal information is supported by the results

of this study: the mean differences in the use of formal

versus informal information were small; and the subjects

120

perceived the formal and informal information to be

significantly different in several dimensions

(qualitative/quantitative nature, timeliness,

confidentiality, understandability, and ease of use). The

complimentary nature of the formal and informal information

is supported by Clancy and Collins [1979], who suggest, "a

major research hypothesis that is not found in existing

literature: an informal system supplements rather than

replaces a formal system" [p. 29].

Implications of the Relationships Among the Variables

The strong relationships among ATTITUDES and RUFI is

not surprising. However, the ATTITUDES-RUFI "link" is so

strong that the additional explanatory value of any one of

ROLE STRESS, LOCUS OF CONTROL, STRUCTURE, and CONSIDERATION

directly on RUFI is insignificant. Strongly suggested is

the importance of attitudes in explaining behavior in

organizations. Personality characteristics, the influences

of significant others, and even role related perceptions

seem to be useful in understanding behavior only through

more specific attitudes.

The importance of ROLE STRESS in explaining variation

in RUFI through ATTITUDES supports the role perspective

adopted in this study. Also supported is the notion that

both personality variables (LOCUS OF CONTROL) and the

121

influence of significant "others" (LEADERSHIP STYLE) effect

role-related perceptions. Implied are a number of

"connections" or similarities between RUFI and a number of

previously studied organizational phenomena, such as

budgetary attitudes [Collins, Anderson, and White, 1981;

Collins, Seller, and Clancy, 1984], satisfaction [Sapp and

Seller, 1980], and budgetary gamesmanship [Collins, Munter,

and Finn, 1983].

Policy Implications

Perhaps most important to the designers and users of

information systems in organizations is the implication

that it may not be desirable to force managers to use

formal systems exclusively. Further, the nature of

business and the situational variability in decision-making

in organizations place practical limits on the ability of

an information system to remain current and to be flexible

enough to meet the managers' needs. Thus, the sole use of

formal information in decision making is likely to have

both short-term and long-term dysfunctional consequences,

and the forced use of inadequate information is likely to

compound the problem by negatively effecting attitudes

toward that information.

The importance of attitudes toward the information in

explaining variation in the relative use of formal and

informal information suggests that attempts to influence

122

managers' use of the information are best spent altering

the managers' attitudes toward the information. Managers'

attitudes can be influenced in a variety of ways.

Educational efforts and the opinions of significant others

may influence an individual's attitudes. Attitudes toward

information may also be influenced by changes in certain

characteristics of the information. This study found that

the formal information is significantly less confidential,

less timely, more quantitative, and more difficult to use

and understand than the informal information. Thus,

improvement in the formal information in these dimensions

is likely to improve managers' attitudes toward the formal

information and the relative use thereof.

The data suggest that attitudes are significantly

influenced by perceptions of ROLE STRESS and that ROLE

STRESS is significantly influenced by LOCUS OF CONTROL and

STRUCTURE. Contrary to expectations, high stress is

associated with relatively favorable attitudes toward

informal information. Implied is the ability of managers

and systems designers to encourage the use of formal

systems by reducing stress (conflict and ambiguity).

Certain leadership activities are apparently useful in

reducing stress, but the effort is complicated by the

influence of personality variables (such as LOCUS OF

CONTROL). Generally, the importance of

individually-oriented variables implies the use of an

123

individually-oriented information system and an

individually-oriented managerial approach. Strongly

suggested is the need to recognize the demands of the

organizational positions and the role-related perceptions

of the individuals occupying those positions.

Limitations of the Study

Even though a two-stage research design was applied in

order to reduce validity concerns, a number of limitations

remain. First, the initial interviews, although rich in

content and strong in internal validity, may not be totally

successful in avoiding all of the substantive and semantic

weaknesses of the questionnaire. The instrument is biased

toward the perceptions of the interview and pretest

subjects. Also, the interview approach to questionnaire

development and testing does not preclude the typical

questionnaire-related issues of self reported data, sample

selection, and non-response bias. Furthermore, interviews

are accompanied by additional weaknesses. Classification

and summarization are often difficult, and data are subject

to such distortions as result from the "halo" effect.

Second, as a field study, the study is strong in

"realism, significance, strength of variables, theory

orientation, and heuristic quality" [Kerlinger, 1973, p.

406], but weak due to the ex post facto nature of the

research, lack of precision in measurement, and potential

124

practical issues, such as feasibility, cost, sampling, and

time [Kerlinger, p. 407]. Since the variables are measured

at one point in time and none of the variables are

manipulated, implications of causality are difficult to

support. The data support only correlational association,

even though previous research, logic, and the statistical

technique employed may suggest directionality.

Finally, generalizability of the conclusions is not

supportable beyond the population sampled. Similar

findings in the interviews and from the questionnaire data

support external validity, but additional empirical

research efforts are important in validating the research

and extending the results of the study.

Suggestions for Future Research

Perhaps most needed are contributions toward the

measurement of the research constructs, RUFI and ATTITUDES.

More specifically, research using "harder" measures of the

use of informal information in decision situations is

needed. Controlled experiments and archival studies may be

useful in understanding the sources of information used by

decision makers in organizations. Additional dimensions

and alternative indicators of individuals' attitudes toward

the information used may also be beneficial. The

apparently conflicting findings of Clancy and Collins

[1979] with those of the current study regarding attitudes

125

suggest that different dimensions may be more important

than others in different decision situations or in

different organizations.

Also suggested are studies of RUFI and ATTITUDES in

other entities, other industries, and across organizational

and industry boundaries. A number of organizational

variables, industry characteristics, and environmental

influences have the potential of explaining

interorganizational variation in ATTITUDES and RUFI.

On a more individual level, RUFI and ATTITUDES may be

influenced by the nature of the position occupied by the

individual being evaluated or by the nature of the position

occupied by the individual making the performance-related

decisions. Certain organizational activities are more

easily monitored than others. Accordingly, different types

of information may be necessary in evaluating the

performance of individuals with differing organizational

responsibilities. Similarly, organizational

responsibilities vary in the extent to which an individual

is required to perform as an individual versus perform as a

group member. Thus, studies of the relationships among

RUFI and ATTITUDES and characteristics of the positions

occupied by the individuals are suggested.

The importance of STRESS in explaining variation in

RUFI contributes to the large volume of research including

role stress as an explanatory variable, and the

126

significance of LOCUS OF CONTROL and STRUCTURE in

explaining variation in STRESS contributes to the research

including role stress as a dependent variable. Suggested

is the continued use of the role perspective for research

in organizations. Additional research of the causes and

effects of role stress would contribute toward the

understanding of behavior in organizations. More specific

to this study, the finding that stress leads to relatively

favorable attitudes toward (and thus relatively more use

of) informal than formal information in performance-related

decision making suggests the need for supporting research.

Finally, the study demonstrates the usefulness of

covariance structural modeling (LISREL) in studying complex

organizational phenomena. The application of the

methodology in similar situations involving latent

constructs and numerous relationships among the constructs

of interest is suggested.

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Stogdill, R. M., Manual for the Leader Behavior Description Questionnaire - Form XII (The Ohio State University, 1963) .

Sujan, H., "Smarter Versus Harder: An Exploratory Attributional Analysis of Salespeople's Motivation," Journal of Marketing Research, Vol. XXIII (February 1986), pp. 41-49.

Tiessen, P., and J. H. Waterhouse, "Towards a Descriptive Theory of Management Accounting," Accounting, Organizations and Society, Vol. 8, No. 2/3 (1983), pp. 251-267.

Van Sell, M., A. P. Brief, and R. S. Schuler, "Role Conflict and Role Ambiguity: Integration of the Literature and Directions for Future Research," Human Relations, Vol. 34, No. 1 (January 1981), pp. 43-71.

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137

, Markets and Hierarchies: Analysis and Antitrust Implications (Free Press, 1975).

Zajonc, R. B., "Compresence," in P. B. Paulus, ed.. Psychology of Group Influence (Erlbaum, 1980), pp. 35-60.

Zedeck, S., and D. Kafry, "Capturing Rater Policies for Processing Evaluation Data," Organizational Behavior and Human Performance (April 1977), pp. 269-294.

APPENDIX A

INTERVIEW SCHEDULE

138

139

1. When do you evaluate performance?

2. What influences performance evaluation?

3. What information does the company suggest you

should use?

4. What kind of information do you get from the company?

5. Describe the other information you use.

6. What does "formal" information (system) mean to you?

7. What is wrong with the formal information it produces?

8. What do you like/dislike about the formal information?

9. What do you like/dislike about the other information?

APPENDIX B

QUESTIONNAIRE

140

141

PART ONE: DEMOGRAPHICS

Instructions: Please circle the correct response for each of the following general questions about yourself.

1. Sex: MALE FEMALE

2. Age: under 21 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 over 60

3. Highest level of your education: GRAMMAR SCHOOL SOME HIGH SCHOOL HIGH SCHOOL GRAD. (or GED) SOME COLLEGE COLLEGE GRAD. GRADUATE DEGREE

4. Years in current position: 1 or less 2 3 4 5 6 7 8 9 10 or more

5. Years with the company: 1 or less 2-5 6-10 11-15 16-20 21-25 26 or more

6. Faction: (1 or 2)

7. Department: (1, 2, 3, or 4)

142

PART TWO: ATTITUDES AND RUFI

Instructions: Below you will be asked a number of questions about the information you use in making performance related decisions in your company. Please answer each question twice. The first response (Section A) refers to "official" company information (anything produced, required, or suggested by company policy or procedure). The second response (Section B) refers to any other information used, such as a "personally-maintained" file or system, memory, or the advice of others. First, please indicate which of the following best describes the "other" information you rely on:

A. An organized, documented set of records, memos, or other data.

B. A loose collection of documentation.

C. Some combination of documentation, advice, and memory.

D. Unwritten advice and/or memory.

E. Other (please specify):

1. How accurate is the information?

2. To what extent does the information "cover" vital items?

3. How easy is it for you to use the data?

4. To what extent is the information detailed?

5. How would you describe your understanding of the information?

6. How confidential is the information

7. How timely is the information?

8. To what extent is the data numbers vs. words?

143

9. To what extent does the information influence your decisions (or suggestions) regarding merit pay adjustments of subordinates?

10. To what extent does the information influence your decisions (or suggestions) regarding promotions of subordinates?

11. To what extent does the information influence your decisions (or suggestions) to terminate the employment of subordinates?

12. To what extent does the information influence the periodic performance evaluations you prepare?

144

PART THREE: STRESS AND LOCUS

Instructions: Please indicate how you feel about each of the following statements by circling the best response from 1 (strongly agree) to 7 (strongly disagree).

1. I receive an assignment without adequate resources and materials to execute it.

2. I have to do things that should be done differently, i^

3. I know what my responsibilities are.

4. I know that I have divided my time properly.

5. I do things that are apt to be accepted by \ one person and not accepted by others. ' ^

6. I know exactly what is expected of me.

7. I receive an assignment without the manpower to complete it.

8. I receive incompatible requests from two or more people.

9. There are clear, planned goals and objectives for my ^ job.

10. I work with two or more groups that operate quite differently.

11. I have to buck a rule or policy in order to carry out an assignment.

12. I feel certain about how much authority I have

13. I work on unnecessary things.

14. Explanation is clear of what has to be done, v /

15. It is impossible for me to believe that chance or luck plays an important role in my life.

16. Sometimes I feel that I don't have enough control over the direction my life is taking.

17. Many times I feel that I have little influence over the things that happen to me.

18. There really is no such thing as "luck."

145

19. Becoming a success is a matter of hard work; luck has little or nothing to do with it.

20. Many of the unhappy things in people's lives are partly due to bad luck.

21. Most people don't realize the extent to which their lives are controlled by accidental happenings.

22. There is a direct connection between how hard I work and the rewards I get.

23. People's misfortunes result from the mistakes they make.

24. The idea that bosses are unfair to workers is nonsense.

25. It is not always wise to plan too far ahead because many things turn out to be a matter of good or bad fortune any how.

26. In my case getting what I want has little or nothing to do with luck.

27. Who gets to be the boss often depends on who was lucky enough to be in the right place first.

28. Many times we might as well decide what to do by flipping a coin.

29. Getting people to do the right thing depends upon ability; luck has little or nothing to do with it.

146

PART FOUR: LEADER

Instructions: Circle the letter that best indicates how often your immediate superior (always to never):

1. Treats all group members as his/her equals

2. Makes his/her attitudes clear to the group

3. Gives advance notice of changes

4. Tries out his/her ideas in the group

5. Is friendly and approachable

6. Assigns group members to particular tasks

7. Does little things to make it pleasant to be a member of the group

8. Encourages the use of uniform procedures

9. Makes sure that his/her part in the group is understood by the group members

10. Maintains definite standards of performance

11. Decides what shall be done and how it shall be done

12. Keeps to himself (or herself)

13. Is willing to make changes

14. Acts without consulting the group

15. Refuses to explain his/her actions

16. Asks that group members follow standard rules and regulations

17. Puts suggestions made by the group into operation

18. Schedules the work to be done

19. Looks out for the personal welfare of group members

20. Lets group members know what is expected of them

APPENDIX C

ANALYSIS OF DEMOGRAPHIC VARIABLES

147

148

LISREL was used to test for the significance of the

demographic variables in explaining variation in the

research variables of interest. Selected LISREL output for

the "null" model used in testing the demographics is

presented on the following page. The particular model used

for testing the demographics portrayed all of the research

variables of interest as endogenous variables and all of

the demographic variables as exogenous variables. The Beta

matrix was left free to allow the research variables of

interest to correlate. The Gamma matrix was the focal

point for testing the significance of the demographic

variables. By freeing certain elements of the Gamma

matrix, the demographic variables were allowed to "load" on

the research variables of interest independently and in a

variety of combinations. Also, the demographics were

allowed to "load" on individual research variables as well

as on groups of research variables. None of the models

allowing the influence of any of the demographic variables

on any or all of the research variables were significant

improvements over the null model presented. Thus, the

demographic variables did not contribute toward explaining

variation in the research variables. Accordingly, none of

the LISREL models used in testing the research hypotheses

included the demographic variables.

149

L S C S A-F A - I R

LISREL ESTIMATES (MAXIMUM LIKELIHOOD)

CONSID BETA

LOCUS STRUCT STRESS ATT-FORM ATT-INFM RUFI

0 1 0

-1 -3 0 10

0 094 250 088 539 225 644

0 0 0 •0 •0 0 2

0 0 726 242 408 073 263

GAMMA AGE

LOCUS STRUCT CONSID STRESS ATT-FORM ATT-INFM RUFI

PHI AGE

AGE EDCTN POSITION CAREER

0 0 0 0

•0 •0 •0

0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0

2 . 9 1 0 • 0 . 4 0 6 1 . 7 7 5 1 . 8 7 3

0 0 0 058 0 8 3 0 6 5 477

EDCTN

0 0 0 0 3 0 9

0 0 0 0 745 064 589

0 0 0 0 0 0

- 0

0 0 0 0 0 445 875

0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0

EDCTN

0.0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0

POSITION

0 . 8 9 6 • 0 . 5 2 7 • 0 . 5 3 7

7 . 7 2 0 1 . 6 3 1

0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 1 . 1 6 3

POSITION CAREER

0.0 0.0 0.0 0.0 0.0 0.0 0.0

CAREER

2.484

MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL

CHI-SQUARE WITH 571 DEGREES OF FREEDOM IS 999.71 (PROB. LEVEL = 0.000)

GOODNESS OF FIT INDEX IS 0.791 ADJUSTED GOODNESS OF FIT INDEX IS 0.756 ROOT MEAN SQUARE RESIDUAL IS 0.141

0.0 0.0 0.0 0.0 0.0 0.0 0.0

APPENDIX D

THE NULL MODEL

150

151

LISREL ESTIMATES (MAXIMUM LIKELIHOOD)

AFl AF2 AF3 AF4 AF5 AF6 AF7 AF8 All AI2 AI3 AI4 AI5 AI6 AI7 AI8 RUFIl RUFI2 RUFI3 RUFI4

LAMBDA Y ATT-FORM

1 1 1 0 1 0 1 0 0 0, 0, 0, 0, 0, 0, 0. 0. 0. 0. 0.

,000 229 279 864 019 336 107 421 0 0 0 0 0 0 0 0 0 0 0 0

ATT-INFM RUFI

0 0 0 0 0, 0, 0, 0, 1. 0. 1. 1. 1. 0. 1. 0. 0. 0. 0. 0.

.0 ,0 ,0 ,0 0 0 0 0 000 969 306 006 023 544 199 467 0 0 0 0

0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 0 . 0 1 .000 0 . 8 3 7 0 . 8 3 2 0 . 7 2 5

LAMBDA X LOCUS STRUCT CONSID STRESS

LOCI LOC 2 LOC 3 LOC 4 LOC 5 STRUCTl STRUCT2 CONSIDl C0NSID2 STRESSl STRESS2 STRESS3

1 0 1 1 1 0 0 0 0 0 0 0

000 898 249 168 229 0 0 0 0 0 0 0

0.0 0.0 0.0 0.0 0.0 1.000 0.550 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.749 0.0 0.0 0.0

0 0 0 0 0 0 0 0 0 1 0 0

0 0 0 0 0 0 0 0 0 000 717 963

152

GAMMA LOCUS

ATT-FORM ATT-INFM RUFI

0.0 0.0 0.0

PHI

LOCUS STRUCT CONSID STRESS

LOCUS

0.195 0.216 0.206

-0.258

STRUCT

OT^ 0.0 0.0

STRUCT

0.974 0.761

-0.436

CONSID

oTo" 0.0 0.0

CONSID

STRESS

oTo" 0.0 0.0

STRESS

0 -0

784 372 0.380

PSI ATT-FORM

0.852

ATT-INFM

0.626

RUFI

2.449

TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.972

TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.993

MEASURES OF GOODNESS OF FIT CHI-SQUARE WITH 458 DEGREES

(PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.778 ADJUSTED GOODNESS OF FIT INDEX ROOT MEAN SQUARE RESIDUAL IS 0

FOR THE WHOLE MODEL OF FREEDOM IS 9 8 5.32

IS 0 242

744

APPENDIX E

THE ATTITUDES MODEL

153

154

LISREL ESTIMATES LAMBDA Y

(MAXIMUM LIKELIHOOD)

AFl AF2 AF3 AF4 AF5 AF6 AF7 AF8 All AI2 AI3 AI4 AI5 AI6 AI7 AI8 RUFIl RUFI2 RUFI3 RUFI4

ATT-FORM

1.000 1.169 1.278 0.847 1.019 0.332 1.134 0.435 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

LAMBDA X

LOCI LOC 2 LOC 3 LOC 4 LOC 5 STRUCTl STRUCT2 CONSIDl C0NSID2 STRESSl STRESS2 STRESS3

LOCUS

1.000 0.898 1.249 1.168 1.229 0.0 0.0 0.0 0.0 0.0 0.0

0.0

BETA

ATT-FORM ATT-INFM RUFI

ATT-FORM

0.0 0.480

-1.093

ATT-INFM

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.949 1.303 0.969 0.988 0.508 1.180 0.442 0.0 0.0 0.0 0.0

STRUCT

0.0 0.0 0.0 0.0 0.0 1.000 0.550 0.0 0.0 0.0 0.0 0.0

ATT-INFM

0.0 0.0 1.187

RUFI

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.852 0.825 0.736

CONSID

0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.749 0.0 0.0 0 0 \j m \y

RUFI

0.0 0.0 0.0

STRESS

0.0 0.0 0. 0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.717 0.963

155

GAMMA LOCUS

ATT-FORM 0.0 ATT-INFM 0.0 RUFI

LOCUS STRUCT CONSID STRESS

0.0

PHI LOCUS

0.195 0.216 0.206

-0.258

PSI ATT-FORM

STRUCT

0.0 0.0 0.0

STRUCT

0.974 0.761

-0.436

ATT-INFM

CONSID

0.0 0.0 0.0

CONSID

0.784 -0.372

RUFI

STRESS

0.0 0.0 0.0

STRESS

0.380

0.873 0.449 1.540

TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.970

TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.993

SQUARED MULTIPLE CORRELATIONS FOR STRUCTURAL EQUATIONS ATT-FORM ATT-INFM RUFI

0.0 0.309 0.361

MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 455 DEGREES OF FREEDOM IS 882.03

(PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.793 ADJUSTED GOODNESS OF FIT INDEX IS 0.760 ROOT MEAN SQUARE RESIDUAL IS 0.167

APPENDIX F

THE FITTED MODEL

156

157

LISREL ESTIMATES (MAXIMUM LIKELIHOOD)

LAMBDA Y STRESS ATT-FORM ATT-INFM RUFI

STRESSl STRESS2 STRESS3 AFl AF2 AF3 AF4 AF5 AF6 AF7 AF8 All AI2 AI3 AI4 AI5 AI6 AI7 AI8 RUFIl RUFI2 RUFI3 RUFI4

1.000 0.715 0.966 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0 0 0 1 1 1 0, 1, 0, 1. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0.

.0

.0

.0

.000

.159 ,271 ,845 ,012 337 156 433 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0, 0, 0, 0. 0. 1. 0. 1. 0. 0. 0. 1. 0. 0. 0. 0. 0.

.0

.0

.0

.0

.0

.0

.0 ,0 ,0 0 0 000 951 310 972 996 508 189 443 0 0 0 0

0 0 0 0 0 0 0 0 0, 0, 0. 0 . 0 . 0 . 0 . 0 . 0 . 0 . 0 . 1 . 0 . 0 . 0 .

. 0

. 0

. 0

. 0

. 0

. 0

. 0

. 0

. 0

.0

.0

.0 ,0 ,0 0 0 0 0 0 000 852 824 736

LAMBDA X LOCUS STRUCT CONSID

LOCI LOC 2 LOC 3 LOC 4 LOC 5 STRUCTl STRUCT2 CONSIDl C0NSID2

1 0 1 1 1 0 0 0 0

000 854 223 134 177 0 0 0 0

0.0 0.0 0.0 0.0 0.0 1.000 0.541 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 0.748

BETA STRESS

STRESS ATT-FORM ATT-INFM RUFI

0.0 -0.682 -0.141 0.0

ATT-FORM

oTo 0.0 0.434

-1.083

ATT-INFM

oTo 0.0 0.0 1.192

RUFI

0.0 0.0 0.0 0.0

158

STRESS ATT-FORN ATT-INFN RUFI

LOCUS STRUCT CONSID

GAMMA LOCUS

-1.007 I 0.0 1 0.0

0.0

PHI LOCUS

0.207 0.222 0.207

PSI STRESS

STRUCT

-0.225 0.0 0.0 0.0

STRUCT

0.989 0.761

ATT-FORM

CONSID

0.0 0.0 0.0 0.0

CONSID

0.786

ATT-INFM RUFI

0.019 0.702 0.439 1.548

TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.977

TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.997

SQUARED MULTIPLE CORRELATIONS FOR STRUCTURAL EQUATIONS STRESS ATT-FORM ATT-INFM RUFI

0 . 9 5 1 0 . 2 0 1 0 .319 0 .359

TOTAL COEFFICIENT OF DETERMINATION FOR STRUCTURAL EQUATIONS IS 0.951

MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 454 DEGREES OF FREEDOM IS 848.54

(PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.799 ADJUSTED GOODNESS OF FIT INDEX IS 0.766 ROOT MEAN SQUARE RESIDUAL IS 0.127