Influence of leadershipcompetency and organizationalculture on responsiveness and

performance of firmsSusita Asree

Department of Management, Marketing and Business Administration,College of Business and Public Affairs, Murray State University, Murray,

Kentucky, USA

Mohamed ZainCollege of Business and Economics, Qatar University, Doha, Qatar, and

Mohd Rizal RazalliCollege of Business, Northern University of Malaysia, Kedah, Malaysia

Abstract

Purpose – The purpose of this paper is to investigate the operations strategy of service firms (hotels)in order to determine whether the infrastructural aspects of their operational practices, i.e. leadershipcompetency and organizational culture, would affect their responsiveness (as a cumulative capability)to their employees and customers and eventually their performance (increase in revenue).

Design/methodology/approach – The approach takes the form of an empirical analysis of data(using structural equation modeling) obtained via a questionnaire survey involving 88 hotels ofvarious ratings in Malaysia.

Findings – The findings indicate that leadership competency and organizational culture havepositive relationships with responsiveness. In addition, responsiveness has a positive relationshipwith hotel revenue. These findings imply that leadership competency and organizational culture areimportant factors for hotels to be responsive to their customers, and in turn responsiveness tocustomers would improve hotel revenue

Research limitations/implications – Some limitations include those that come with cross-sectionalanalysis, the use of perceptual measures, and low response rate.

Practical implications – Hotel managers need not only to improve their leadership competency butalso to instil an organizational culture that is supportive of their employees. These operations practiceswould make their hotel more responsive to customer needs, which in turn would help to improve theirhotel performance.

Originality/value – There are differences between this study and prior studies. Leadershipcompetency was examined in the context of service operations practices where evidence was providedthat leadership competency would affect cumulative capability of responsiveness of service firms.Organizational culture was viewed in the context of operations practices, where the finding impliesthat organizational culture practices, such as attentive listening to staff, giving reward and recognitionfor their performance, and taking care of their welfare, would lead to a positive effect on the ability of ahotel to be responsive toward their customer needs.

Keywords Leadership, Organizational culture, Organizational performance, Hospitality services,Corporate strategy, Malaysia

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0959-6119.htm

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Received 3 February 2009Revised 22 April 2009,6 July 2009,10 August 2009Accepted 7 September 2009

International Journal ofContemporary HospitalityManagementVol. 22 No. 4, 2010pp. 500-516q Emerald Group Publishing Limited0959-6119DOI 10.1108/09596111011042712

1. IntroductionTourism is an important industry that has contributed to the growth of the economy ofMalaysia (Mahendran et al, 2006). As an illustration, the tourism receipts haveincreased steadily from RM8,580.5 million in 1998 to RM49,561.2 million in 2008(Table I). As shown in Table I, the tourist arrivals to Malaysia had also increased from5.5 million in 1998 to 22 million in 2008.

Strategy plays a major role in global competition of a service industry. In order tocompete effectively, service organizations such as hotels that were investigated in thisresearch have to link and incorporate their operations strategy to their businessstrategy (Skinner, 1969). Failing to do this may sacrifice their competitive advantage(Dangayach and Deshmukh, 2001).

Just as in any industry, a service industry requires an effective operations strategy.The primary purpose of the service operations strategy is to create value to customersin terms of quality, price, and time (Haksever et al., 2000). Therefore, in order to providethese values, a service operations strategy should consider the management processwithin the firm across a broad range of practices as well as the outcomes of the process(Meyer et al., 1999). A practice refers to established systems and behaviors in anorganization (Morita and Flynn, 1997). In other words, in order to understand theservice operations strategy, the current practices used by hotel management should beexamined since they reflect the operations strategy of the service firms. This approachcorresponds to that of Mintzberg and Waters (1985) who see strategy as “a pattern in astream of actions, not decisions.” In fact, in operational strategy there are twoapproaches for framework development:

(1) based on actions (practice); and

(2) based on decisions.

Research suggests that it is actions rather than decisions that should be included in theoperational strategy framework (as cited in Christiansen et al., 2003). By focusing onthe practices that are implemented in an organization, the operations strategyframework represents a framework that can assist the organization in improving its

Year Arrivals (million) Receipts (million RMa)

2008 22.0 49,561.22007 20.9 46,070.02006 17.45 36,271.12005 16.4 31,954.12004 15.7 29,651.42003 10.5 21,291.12002 13.2 25,781.12001 12.7 24,221.52000 10.2 17,335.41999 7.9 12,321.21998 5.5 8,580.5

Note: a USD1.0 ¼ Ringgit Malaysia (RM) 3.62 (20 April 2009)Source: www.tourism.gov.my/corporate/research.asp (accessed 17 April 2009)q Tourism Malaysia

Table I.Tourist arrivals andreceipts to Malaysia

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performance (Bozarth and McDermott, 1998). Examples of research in operationsmanagement that used such practices include those that were carried out by Collinsand Cordon (1997) and Mills et al. (1998). Therefore, for the purpose of this study, theterms operational strategy and operational practices will be used interchangeably.

Generally, less emphasis is given to people and organizational aspects of operationspractices (Skinner, 1969), which are very important to service companies. As a matterof fact, this area is not included in most operational strategy studies. Fitzsimmons andFitzsimmons (2001) suggest that operations practices of a service organization need toconsider two main aspects of service, i.e. structural and managerial. In this paper, weexamined only the infrastructural aspects of operational practices, i.e. the influence ofleadership competency and organizational culture, on service organizations (hotels). Inother words, the main reason for conducting this study is to answer the question ofwhether or not these two aspects of operational practice affect hotel responsivenessand eventually its performance. Specifically, we use structural equation modeling(SEM) to empirically investigate how organizational responsiveness and performanceare influenced by organizational leadership competency and culture. The next sectionpresents the literature review related to this study.

2. Theoretical background2.1 Organizational performanceThe concept of organizational performance is related to the survival and success of anorganization. The measurement of the organizational performance is critical in serviceorganizations as well as in manufacturing organizations (Brynjolfson, 1993; Atkinsonand Brown, 2001). Gronroos (1992) stressed that service firms must concentrate moreon building customer relationships rather than on short-term transactions (cited inPaulin et al., 1999). Furthermore, in service organizations such as hotels, this is evenmore critical because of the nature of their business which is more focused on humanskills and intangible assets (Bharadwaj et al., 1993).

There are two ways of measuring performance, i.e. using objective and subjectivemeasures. The objective measure uses real figures from organizations while thesubjective measure uses perception of respondents ( Johannessen et al., 1999; Pizam andEllis, 1999). In this study, we decided to use a perceptual or subjective measure toassess organizational performance (Ackelsberg and Arlow, 1985), because:

(1) it is a more consistent measure of performance and it does not vary broadlyfrom the objective measures in terms of accuracy; and

(2) asking respondents for specific financial measures may generate anxiety inthem over the confidentiality of the information they provide.

Also, the subjective measures may offer better perspective of organizationaleffectiveness in the longer terms (Pizam and Ellis, 1999). Thus, we define hotelperformance as “the level of increase or decrease in hotel revenue”. A recent study byOzcelik et al. (2008) also assessed firms’ performance in terms of increase in revenue.

2.2 Leadership in operations practicesBarrow (1977) defines leadership as “the behavioral process of influencing individualsor groups towards set goals”. In addition, he also revealed that past research onleadership can be classified into four orientations:

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(1) leader behavior investigation;

(2) situational and reciprocal causations;

(3) leadership effectiveness theories; and

(4) normative leadership approach.

The leader behavior investigation is related to the actual acts or behaviors of the leaders.Meanwhile situational and reciprocal causations assess the influence of situationalfactors on leader’s behavior and the causes of his/her behavior on subordinates’activities. Further, leadership effectiveness theories are related to the effectiveness of acertain leadership style in an appropriate situation. Finally, normative leadershipapproach is described as an effective action in any given situation. Barrow (1977) alsoindicates that the leadership framework should consist three variables: leader’scharacteristic, leader’s behavior and the environment. Also, Zaccaro (2007) definesleadership practices as “the extent of leaders’ behavior in making decisions related tooperational systems” of the hotels under study. Interestingly, Church (1995) found thatmanagers’ leadership behaviors in an airline services organization were significantlyrelated to indicators of service quality and business unit performance.

In drawing the line between this study and other leadership research, this studyidentifies leadership practices that are related to responsiveness, particularly in thehotel industry. A study on behavior of lodging industry leaders by Chung-Herrera et al.(2003) found eight types of competency factors of leaders in the lodging industry. Intheir study they used 99 statements to assess the following eight leadershipcompetency factors:

(1) Self-management, which comprises ethics and integrity, time management,flexibility and adaptability, and self-development dimensions.

(2) Strategic positioning, which comprises awareness of customer needs,commitment to quality, managing stakeholders management, and concern forcommunity dimensions.

(3) Implementation, which includes the dimensions of planning, directing others,and re-engineering.

(4) Critical thinking, which includes strategic orientation, decision making,analysis, and risk taking and innovation dimensions.

(5) Communication, which includes the dimensions of speaking with impact,facilitating open communication, active listening, and written communication.

(6) Interpersonal, which comprises the dimensions of building networks, managingconflict, and embracing diversity.

(7) Leadership, which comprises the dimensions of teamwork orientation, fosteringmotivation, fortitude, developing others, embracing change and leadershipversatility.

(8) Industry knowledge, which is the business and industry expertise dimension.

2.3 Organizational culture in operations practicesOrganizational culture is significantly related to service organizations effectiveness(Paulin et al., 1999). In past research, organizational culture has been explored as the

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source of competitive advantage in post merger/acquisition integration, and as theprime factor in the success or failure of a large-scale change effort (Trefry, 2006). Astudy by Xenikou and Simosi (2006) has found that the achievement and adaptivecultural orientations has a direct effect on performance of a large financial organizationin Greece. In line with these findings, this study investigated the effect oforganizational culture on organizational performance. As mentioned earlier, theinclusion of organizational culture in the service operations practices still needs to befurther explored (Dangayach and Deshmukh, 2001; Fitzsimmons and Fitzsimmons,2001; Ingram, 1997). This view is also supported by a more recent study by Fang andWang (2006), which argues that the effect of organizational culture on operationspractices studies has been neglected in the early years.

Organizational culture has been defined at two levels (Trefry, 2006):

(1) practice and behavior (how things are done here); and

(2) underlying practice (beliefs and values).

Furthermore, Trefry (2006) noted that among the researchers who definedorganizational culture at the level of underlying values include Davis et al. (2002),Schein (1985) and Hofstede (1997). In similar thought, Paulin et al. (1999) categorizedthese two levels as visible and invisible; the visible level includes the behavior patterns,the physical and social environment, and the written and spoken language used by thegroup while the invisible level relates to the group’s values or the group’s basicassumptions. In line with this contention, Hofstede (1997) defines organizationalculture as a collective programming of the mind that distinguishes the members of oneorganization from another. He also indicated that shared perceptions of daily practicesshould be included in the organizational culture. Besides these two broad categories,generally, organizational culture is defined as the set of common norms and valuesshared by people in an organization (Deshpande and Webster, 1989). Among theexamples of organization and culture practices include the way organizationcommunicate with, develops, empowers and involves its staff (Prabhu et al., 2002).

Following Deshpande and Webster’s (1989) definition mentioned above, this studydefines organizational culture practices as “the extent of shared values and beliefs thatare related to operational systems practiced by a hotel”. Again, to draw the linebetween this research and other organizational culture researches, this research onlyconsiders organizational culture practices that are related to responsiveness, which isdiscussed in the next section. The responsiveness-related organizational culturepractices were adapted from Coughlan and Harbison’s (1998) study that emphasizesemployee management, flexibility and performance standards and measurement,leadership, process management, quality management, service culture, service design,service recovery, understanding customers, and value creation in contributing to theperformance of Irish service firms. In their research, responses to 80 questions wererated on a five-point Likert-type scale.

2.4 Organizational responsivenessFlynn and Flynn (2004) suggest the term “capability” to refer to the “actual strength” ofan organization instead of the goal or plan it wants to achieve. Similarly, this studyuses the term “capability” to reflect the strategic capability of the operationsmanagement function. Examples of these capabilities are costs, time, quality, and

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flexibility (Gaither and Frazier, 2002). Specifically, this study views responsiveness asthe competitive capability of the operations management function in a hotel.Responsiveness is chosen as the competitive capability because: it has the elements ofcombined goals such as time, quality and flexibility; the term is suitable for serviceoperations of a hotel, and more importantly; the term is used to differentiate it from theterm “flexibility”.

In the literature (e.g. Palmer, 2001; Parasuraman et al., 1988; Stalk, 1988; Tsang andQu, 2000) the term “responsiveness” has been viewed from two separate functionalperspectives: service marketing and operations management. From theservice-marketing viewpoint, it is related to the willingness to help customers and tothe speed of the service rendered and from the operations management viewpoint, it ismore related to the speed and variety of product/service offered. In this study wecombined together the two perspectives of responsiveness. Hence, the responsivenesshere refers to “the ability of a hotel to provide speedy services and a variety of servicesas well as the willingness to help customers within service delivery processes”. Thus,in this definition, responsiveness represents the cumulative capabilities in terms ofmultiple performance measures such as quality, speed (flexibility), and service. Themultidimensionality of the responsiveness assessment was also demonstrated in otherstudies (e.g. Holweg, 2005; and Hoyt et al., 2007).

2.5 Framework of the study and hypothesesBased on our literature review, we developed the research’s framework as shown inFigure 1. As shown in this Figure, in general, we predicted that leadership practices (interms of leadership competency) and organizational culture would affect responsivenessand eventually hotel performance (revenue change). The development of the hypothesesof the study is discussed next.

2.5.1 Relationship between leadership and responsiveness. Past studies have foundthat leadership practices are directly related to organizational performance(e.g. Castanias and Helfat, 1991; Church, 1995; Coughlan and Harbison, 1998; Fahy,2000; Heskett et al., 1994; Ozcelik et al., 2008; Prabhu et al., 2002). For example,leadership in the service-profit chain anchors the chain success (Heskett et al., 1994),while in the service management model, leadership is found to be the key driver forexcellence performance (Coughlan and Harbison, 1998; Prabhu et al., 2002). Thesestudies have found the significant role of leaders in achieving high performance. Theresource-based view also places an essential role of leaders in achieving competitiveadvantage (Fahy, 2000). Furthermore, it has been found that good top management

Figure 1.Framework of the study

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quality is a potential source of sustainable competitive advantage (Castanias andHelfat, 1991) and for effective service (Armistead and Kiely, 2003). These studies,however, only examined the link between leadership practices and organizationalperformance. Thus, the link between leadership practices and responsiveness stillneeds to be explored. This is because, for a firm to become a responsive competitor, itrequires a clear and an attractive vision from its leaders (Stalk and Hout, 1990). In otherwords, leadership is important for responsiveness to occur. Other studies also suggesta significant positive relationship between leadership and responsiveness (in terms ofquality, speed and flexibility) (e.g. Crocitto and Youssef, 2003; Crosby, 2002; Jabnounand Rasasi, 2005). Hence, based on the above findings, this study posits that:

H1. The leadership competency is positively related to the level of responsiveness.

2.5.2 Relationship between organizational culture and responsiveness. As pointed outearlier, organizational culture practices refer to the shared values and beliefs that arerelated to operational systems practiced by an organization. A prior research has founda direct relationship between organizational factors and culture and organizationalperformance (Coughlan and Harbison, 1998). Meanwhile, relationships betweenorganizational culture and responsiveness (in terms of quality, speed and flexibility)are suggested by a variety of studies. Organizational culture is important for providingconsistency and flexibility in order to be responsive to customer demands (Crocitto andYoussef, 2003). In order to be responsive and to achieve sustainable competitiveadvantage, the culture of learning is found to be an important organizational capability(Smith et al., 1996). Furthermore, for an organization to be effective, an organizationalculture that is compatible with client-orientation (responsiveness) is essential (Paulinet al., 1999). More recent studies also suggest some relationship between organizationand culture and responsiveness. For example, Theoharakis and Hooley (2003) foundthat the organizational resources such as commitment to learning and planningflexibility are positively related to responsiveness. In another study, Kritchanchai(2004) found that organizational structure would influence the responsiveness of firms.Finally, a more recent study by Fang and Wang (2006) found a positive relationshipbetween organizational culture and operations performance such as quality andflexibility. Thus, based on these findings, this study hypothesizes that:

H2. The organizational culture is positively related to the level of responsiveness.

2.5.3 Relationship between responsiveness and performance. As mentioned above,responsiveness refers to the ability of an organization to respond to its customer needsin terms of quality, speed, and flexibility. Stalk (1988) proposed that a responsiveorganization would achieve competitive advantage in terms of business performance,customer satisfaction, innovation, and financial performance. In relation to this,responsiveness (in terms of quality) has been found to have positive associations withcosts, financial performance, customer satisfaction, and customer retention(Sureshchandar et al., 2002). In addition, another study found that market-orientedorganizations achieved better performance in terms of sales growth (Gray et al., 2000).More recent studies also uncovered positive relationships between responsiveness andfinancial as well as non-financial performances (Chen et al., 2004; Kritchanchai, 2004;Theoharakis and Hooley, 2003). Therefore, this study hypothesizes that:

H3. Responsiveness is positively related to performance (revenue).

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3. Methodology3.1 Survey instrumentThe factors investigated in this study were measured on a five-point Likert scale withanchors ranging from strongly disagree (1) to strongly agree (5) for the independentvariables of leadership, organizational culture, and responsiveness (mediatingvariable). The respondents were asked to rate their hotel’s current practices inrelation to leadership practices, organizational culture practices and level ofresponsiveness. The eight factors used to measure leadership competency wereadapted from Chung-Herrera et al. (2003), while the organizational culture variable wasadapted from Coughlan and Harbison (1998). As for the dependent variable, hotelrevenue, the Likert-type scale with anchors ranging from decreased significantly (1) toincreased significantly (5) was also used. The respondents were asked to indicate thechanges in their hotel revenue over the past three years. The items used for assessingrevenue change were adapted from Evans (2005). Finally, our conceptualization andoperationalization of the responsiveness variable was based on studies byParasuraman et al. (1988) and Stalk and Hout (1990). Owing to the limitations of themeasurement of responsiveness in prior studies a new measurement scale called theResponsiveness Index (RI) was designed for this study.

In designing the RI, we followed the guidelines suggested by Phillips and Moutinho(1999). The responsiveness was assessed at each of the five service encounters (a pointwhere customers meet a service provider) which are common in the process of servicedelivery in a hotel:

(1) before check-in;

(2) at check-in;

(3) after check-in;

(4) at check-out; and

(5) after check-out.

In order to assess the validity of the instrument, a within-scale factor analysis wascarried out separately for each encounter. The justification for this was that the fiveencounters represent a process, hence they were distinct dimensions. Furthermore, iffactor analyses were done simultaneously for all the encounters, responsiveness couldnot be assessed according to the process mentioned above. Besides that, this withinscale factor analysis also provided the convergent validity for responsiveness. The testshowed that all variables had Cronbach alphas that exceeded the cut-off point of 0.7(Nunnally, 1978).

In assessing the level of responsiveness, the studies by Parasuraman et al. (1988)and Stalk and Hout (1990) were used as the main guidance. The responsivenessvariable in this study was measured by three constructs, i.e. speed, variety, andwillingness. Then, responsiveness of the hotel was assessed according to the processencountered by customers. This categorization of service encounters was offered byDanaher and Mattsson (1994), i.e. the encounters at check-in, room, restaurant,breakfast, and checkout. This study added two additional dimensions (before check-inand after check-out) to depict the entire process of customer encounter. Therespondents were asked to rate their current hotel’s responsiveness on the scale of 1 to5 (strongly disagree to strongly agree). The RI was developed from the data. Basically,

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the index was obtained through the assessment of 25 indicator variables (statements)of responsiveness by the respondents at the five service encounters mentioned above.Two main steps were involved in calculating the RI: calculating the weighting of eachof the items at each service encounter; and calculating the RI.The values obtained atthe five encounters were converted into a single index ranging from 0 (lowresponsiveness) to 1 (high responsiveness). Detailed descriptions of how the RI iscalculated can be found in Razalli et al. (2007).

3.2 Data collectionA self-administered questionnaire was designed to collect the data needed for thestudy. Before sending the questionnaires to hotels, a pilot test was conducted usingin-depth interviews with experts (managers) in hotel management and operations inorder to increase the content validity of the measurements in the questionnaire. Thefeedbacks from the interviews were used to revise the final questionnaire beforesending it to the respondents.

The respondents of this study included all hotels in Malaysia that received a rating(1 to 5 stars) from the Malaysian government. The list of these hotels was available inthe Accommodation Directory published by the Ministry of Tourism (TourismMalaysia, 2007). Customer service, number of employees, responsiveness, etc. will varybetween one-star and five-star hotels, but our purpose was to investigate these issuesfor the whole of the hotel industry in the country rather than to examine theirdifferences in term of those issues. Future study can examine the differences in theseissues among the hotels of various ratings.

In addition, the questionnaires were sent in two waves of mailing in our efforts toreach the minimum sample size requirement for this study. Questionnaires were sent tosenior managers of the hotels. For each hotel, only one top or senior OperationsManager was asked to participate in the study. We surveyed only the senior managersof the hotels because we believe that they are the ones who would be knowledgeableabout the subject matter being investigated. In the first wave, a total of 245 hotels wererandomly selected from the list provided by the Ministry of Tourism. Out of those 245hotels, 52 (21 percent) hotels responded. This amount was not sufficient for furtheranalysis. Hence, a second wave of questionnaire mailing was carried out. In the secondwave, 229 questionnaires were distributed, and 41 of them were returned. However, outof these 41, only 36 (16 percent) questionnaires were useful for further analysis. Theoverall number of responses from the two waves of mailing was 88 hotels or 19 percent.This amount was sufficient for analysis. Even though the response rate was low, thenumber of responses used for analysis was similar or even better as compared toprevious research in operations strategies/practices such as those by Swink et al.(2005) – 57 plants, Morita and Flynn (1997) – 46 plants, and Espino-Rodriguez andPadron-Robaina (2004) – 50 hotels.

To test for non-response bias, the first and the second waves of returnedquestionnaires were compared (Armstrong and Overton, 1977). The results ofindependent t-test revealed that there was no statistical significant difference betweenthe first wave and the second wave in all the variables of the study.

The final sample consisted of 77.3 percent male and 22.7 percent female respondentswho were between 36 to 45 years old. All the respondents held a managerial position intheir hotels. In terms of the hotel profile, there were 6.8 percent one-star hotels, 14.8

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percent two-star hotels, 31.8 percent three-star hotels, 26.1 percent four-star hotels, and20.5 percent five-star hotels. Most of these hotels had more than 50 rooms and werelocated in city areas.

3.3 Validity and reliabilityThe current study assessed the content validity subjectively using the extensiveliterature review and panel of experts in the hospitality industry. These expertsconsisted of managers of hotels and academics who had experiences working in thehotel industry. The second assessment was related to criterion related validity.Criterion related validity refers to the extent to which the factors measured are relatedto pre-specified criteria (Saraph et al., 1989). In this study, leadership andorganizational culture practices had a medium to large correlation value to hotelrevenue (r ¼ 0.50 and 0.42, p , 0.01) (Cohen, 1988). Hence, the variables of the studyexhibited the criterion related validity.

In addition, the exploratory factor analysis with Varimax rotation was used to assessthe construct validity of the research instrument. Exploratory principal factor analysisalso provides “ad hoc” evidence of convergent and discriminant validity (Davis et al.,2002). The results of the factor analysis showed that two factors emerged for theindependent variables (leadership competency and organizational culture) and 1 factor(hotel revenue) for the dependent variable. The hotel revenue included items that pertainto total operating revenue, RevPAR, ROI, occupancy rate, labor productivity, marketgrowth, market share, and returning guest. What constituted the leadership competencyand the organizational culture variables have already been discussed above.

In the case of the mediating variable, responsiveness, we designed an index toassess the level of hotel responsiveness. Since these encounters represent a process, awithin-scale factor analysis was carried out. The results of the reliability test areshown in Table II. As can be noted in Table II all values exceeded the cut-off point of0.7 (Nunnally, 1978). Also, as can be seen in Table II, all the Average VarianceExtracted (AVE) values obtained exceeded the minimum level of 0.50 (Fornell andLarcker, 1981; cited in Kassim and Abdullah, 2008) demonstrating adequatediscriminant validity of the constructs.

3.4 FindingsThe hypotheses of the structural equations model were tested using VisualPLS. Thisparticular tool was chosen to analyze SEM because of its applicability to our smallsample size (88 respondents).

The significance of the hypothesized relationships was determined by t-statistic. Asshown in Figure 2 and Table III, all relationships were found to be significant.Specifically, H1, which tested the relationship between leadership competency andresponsiveness was found to be positively significant (b ¼ 0.47, p , 0.01). Furthermore,

Construct Composite reliability AVE

Leadership competency 0.94 0.65Organizational culture 0.90 0.69Responsiveness 0.98 0.78Performance 0.87 0.54

Table II.Composite reliability and

average varianceextracted (AVE) for the

model

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H2 that posited the positive relationship between organizational culture andresponsiveness was also found to be significant in the expected direction (b ¼ 0.23,p , 0.10). Finally, the relationship between responsiveness and hotel revenue, H3, wasalso found to be positively significant (b ¼ 0.56, p , 0.01). Following Cohen et al.’s(2003) recommendations, standardized path coefficient (b) with an absolute value of lessthan 0.10 may indicate a “small” effect; a value of around 0.30 a “medium” effect; and avalue of 0.50 or more a “large” effect. Thus, the influences of leadership competency onresponsiveness and responsiveness on performance can be considered as large whereasthe influence of culture on responsiveness can be considered as medium.

4. Discussion, implications, and conclusionThis study is about an investigation of the effects of the operational practices of thehotels in terms of their leadership competency and organizational culture on theirresponsiveness that would then lead to their performance improvement. In otherwords, we argue that hotel performance in terms of its revenue can be improvedthrough operations practices of leadership competency and organizational culture. Thefindings of this study would add further knowledge in the area of service operationspractices, especially in the “soft” issues (Fang and Wang, 2006) related to managementin the hotel industry. Specifically, we examined the relationships among the soft issues,namely leadership competency and organizational culture practices, responsiveness,and hotel revenue. In turn, using the structural equation modeling, we found that bothpractices, i.e. leadership competency and organizational culture, have positiverelationships with responsiveness. In addition, we also found that responsiveness has apositive relationship with hotel revenue. These findings imply that:

. leadership competency and organizational culture practices are importantfactors for hotels in order to be responsive to their customer needs; and

. being responsive to customer needs would improve hotel revenue.

Figure 2.A causal model ofleadership andorganizational culturepractices onresponsiveness andperformance

Hypothesis b p-value

H1 0.47 ,0.001H2 0.23 ,0.05H3 0.56 ,0.001

Table III.Results of hypothesestesting

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More detailed interpretations of our finding are discussed next.Based on the mean score obtained, hotel managers perceived that their organization

have good leadership practices (M ¼ 4.18). In addition, the SEM analysis showed thatleadership competency is positively related to responsiveness. This finding isconsistent with the resource-based view and other studies that highlight the significantrole of leaders in achieving high performances (Castanias and Helfat, 1991; Coughlanand Harbison, 1998; Fahy, 2000; Heskett et al., 1994; Prabhu et al., 2002). Theseprevious studies also found significant relationships between leadership practices andperformance. For example, Coughlan and Harbison (1998) found leadership practices tobe the key driver in achieving high performance. Their finding is also supported byanother study carried out by Prabhu et al. (2002) who found leadership as the keyenabler of business excellence in public sector organizations. Meanwhile, Heskett et al.(1994) argue that leadership in the service profit chain anchors the chain success. Inrelation to the resource-based view, this study support Castanias and Helfat’s (1991)and Fahy’s (2000) contentions on the role of leaders in achieving competitiveadvantage. This finding is also in concordance with previous researchers who havealso found significant role of leaders in achieving higher or excellent performances bytheir organization (Crocitto and Youssef, 2003; Crosby, 2002; Jabnoun and Rasasi,2005). In the context of this study, good leadership competency such as self-managing,strategic positioning knowledge, critical thinking, communication skill, interpersonalskill, leadership skill, and industry knowledge and experience would improve the levelof hotel’s responsiveness towards its customer needs. The main difference between thisstudy and the prior studies is that leadership is looked in the context of serviceoperations practices. We provide evidence that leadership competency would affectcumulative capability or responsiveness of service firms.

Second, organizational culture reflects the extent of shared values such as listening,giving rewards and recognitions, and caring for employees’ welfare. The mean scoreshowed that the hotels were practicing organizational culture that is conducive to theiremployees’ work (M ¼ 4.23). Further, the finding shows that organizational culture ispositively related to the responsiveness of the service firms. This particular findingsupports prior studies which found the relationship between organizational cultureand operations practices (Crocitto and Youssef, 2003; Fang and Wang, 2006; Paulinet al., 1999; Smith et al., 1996; Theoharakis and Hooley, 2003). Similarly, the maindifference between this study and the prior studies is that we have viewedorganizational culture in the context of operations practices. Our finding implies thatorganizational culture practices such as listening to staff, giving reward andrecognition for their performance, and taking care of their welfare would lead topositive effect on the ability of a hotel to be responsive toward their customers.

Finally, we found that the ability of hotels to be responsive to their customer needswould improve their revenue. In other words, by providing customers with speedyservices, variety of services, and having employees with good attitudes would enhancehotel revenue. This result supports the proposition that responsive organizationswould achieve competitive advantage in their organizational performance (Stalk andHout, 1990). Additionally, the finding provides additional support for studies related toresponsiveness and organizational performance (Chen et al., 2004; Kritchanchai, 2004;Sureshchandar et al., 2002; Theoharakis and Hooley, 2003). Other main differencesbetween this study and the prior research are in terms of the methodology used to

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assess responsiveness and the conceptualization of responsiveness as a cumulativecapability.

Based on our results, a number of practical and managerial implications can bederived. First, in order to improve their hotel’s responsiveness to their customer needs,hotels managers need to possess good leadership competency by upgrading their skillsand knowledge in terms of self-managing, strategic positioning, implementation,critical thinking, communication, interpersonal relationship, and being well-versedwith the industry. Second, in order to improve their hotel’s responsiveness to theircustomer needs, hotels managers also need to instill an organizational culture that isconducive to listening to their staff, giving rewards and recognition for theirperformance and caring for their welfare. Last but not least, with their ability toincrease the hotels’ responsiveness via these two operational practices the managerscan expect the revenue of their hotel to improve.

This study examined two types of operations practices – leadership competencyand organizational culture – that could affect organizational performance. Futureresearch should attempt to examine other operations practices or strategies that mayaffect responsiveness.

In conclusion, after being inspired by Fang and Wang’s (2006) study, we haveinvestigated the effect of “soft issues” such as leadership competency andorganizational culture on operations practices and organizational performance inservice companies. Additionally, we have also viewed operations practices in terms ofcumulative capability (responsiveness) as suggested by Flynn and Flynn (2004). Theresults support all the hypotheses and confirm the impact of leadership practices andorganizational culture on responsiveness and eventually on performance. In otherwords, these findings imply that performance of service companies not only depend onstructural issues but also on soft or infrastructural issues such as leadershipcompetency and organizational culture. However, these findings must be further testeddue to some limitations of our study such as its cross-sectional nature, the use ofperceptual measures, and the low response rate. Another weakness of this study is ouruse of a single measure with a purely subjective perception, i.e. increase or decrease inrevenue rather than multiple measures to assess hotel performance. It is hoped thatfuture research could overcome these limitations so that a better generalization couldme made. Despite these limitations, this study offers new knowledge to researchers andpractitioners regarding the effect of leadership behaviors and organizational culture onoperations practices and on overall organizational performance of service firms.

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Corresponding authorSusita Asree can be contacted at: sasree@murraystate.edu

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