theinterplaybetweenemployeeandfirm … 2017... · 2017-05-12 · contribution1:identifying...

British Journal of Management, Vol. 00, 1–20 (2017)DOI: 10.1111/1467-8551.12230

The Interplay Between Employee and FirmCustomer Orientation: Substitution Effect

and the Contingency Role ofPerformance-Related Rewards

Dennis Herhausen,1 Luigi M. De Luca2 and Michael Weibel11Institute of Marketing, University of St. Gallen, Dufourstr. 40a, 9000 St. Gallen, Switzerland, and 2Cardiff

Business School, Cardiff University, Colum Drive, Cardiff CF10 3EU, UKCorresponding author email: [email protected]

This paper identifies and explains a potential tension between a firm’s emphasis on cus-tomer orientation (CO) and the extent to which employees value CO as a success factorfor individual performance. Based on self-determination theory and CO implementationresearch, the authors propose that firm CO may represent both autonomous and con-trolled motivations for CO, but that employees’ CO is more strongly linked to individ-ual performance when employees experience solely autonomous motivation. Hence, theauthors expect a substitution effect whereby the link between employees’ CO and theirperformance is weaker when firmCO is high. Furthermore, the authors examine a bound-ary condition for the previous hypothesis and propose that performance-contingent re-wards have a positive effect on the internalization of the extrinsic motivation stemmingfrom firm CO. Two multilevel studies with 979 employees and 201 top management teammembers from 132 firms support these hypotheses. Against previous research, these find-ings offer a new perspective on the effectiveness of CO initiatives, propose employees’motivational states as the theoretical explanation for the heterogeneity in the link be-tween employee CO and performance, and reappraise the role of performance-contingentrewards in CO research. Managerial implications for the effective implementation ofcustomer-oriented initiatives within firms are provided.

Introduction

It is widely accepted that a firm’s ability to benefitfrom customer orientation (CO) is contingenton the employees who implement it (e.g. Brachet al., 2015; Kennedy, Lassk and Goolsby, 2002;Lin et al., 2016). Many companies are actingon this belief, as witnessed by organization-wideCO initiatives such as GE’s Gold Standard inMarketing Program and Macy’s Customer Cen-tric Initiative. However, many of these efforts

The authors thank Heiner Evanschitzky and the anony-mous reviewers, Ajay Kohli, and participants of aresearch seminar at the University of St. Gallen for theirhelpful comments on previous drafts of this paper.

are ineffective. For example, evidence indicatesthat, while 56% of firms perceive themselves asbeing very customer oriented, only 12% of theircustomers agree (CMO Council, 2008). Critical tothe success of CO initiatives is the understandingof what motivates employees to adopt a CO.The CO implementation literature suggests two

suchmotivations: the need to comply with the nor-mative mandate of the firm (Gebhardt, Carpenterand Sherry, 2006) and the self-driven recognitionof CO as an important job value (Zablah et al.,2012). These two motivations can be differentiatedin line with self-determination theory (SDT), amacro theory of motivation that explains howemployees identify with values and behaviours

© 2017 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX42DQ, UK and 350 Main Street, Malden, MA, 02148, USA.

2 D. Herhausen, L. M. De Luca and M. Weibel

that are endorsed by their firm (Gagne and Deci,2005; Ryan and Deci, 2000). First, organizationalleaders establish, diffuse and institutionalizecustomer-oriented values and norms in top-downCO initiatives (e.g. Stock and Hoyer, 2005). In linewith the normative perspective of the CO litera-ture, SDT suggests that, as a result of organiza-tional CO initiatives, employees will become morecustomer oriented in response to an inducementby an external agent. This external source of COmay lead employees to internalize the importanceof CO in their work value set (i.e. autonomousmotivation) and/or to act based on a certain senseof pressure and obligation (i.e. controlled motiva-tion). Second, employees’ identification with COas a work-related value may also be a self-inducedchoice, driven by inherent personal interest (i.e.autonomous motivation). Thus, employee CO canresult from a purely autonomous motivation (lowexternal stimulus for CO, high personal interest inCO), from a relatively controlled motivation (highexternal stimulus for CO, low personal interest inCO) or from a combination of both (high externalstimulus for CO, high personal interest in CO).

Importantly, there is growing consensus inrecent SDT research that autonomous and con-trolled motivations coexist independently ofeach other in the work context (e.g. Cerasoli,Nicklin and Ford, 2014; Gerhart and Fang, 2015;Grant et al., 2011). Moreover, SDT researchindicates that the combination of controlledand autonomous motivations towards the samebehaviour may lead to different performanceoutcomes for employees (Gagne and Deci, 2005).For example, Grant et al. (2011) found acrosstwo studies that the same level of initiative amonghighly autonomously motivated employees wasmore positively related to performance when theyreported low levels of controlled motivation. Thismay pinpoint a potential tension between firmCO and individual CO. If employees perceivefirm CO as controlled motivation, CO will not befully internalized and therefore the relationshipbetween employee CO and performance will beweaker. In contrast, if firm CO is perceived as adriver of autonomous motivation, the employeeCO–performance link will be stronger, owing toa higher degree of CO internalization. Despitethe relevance of this issue for understandingemployees’ motivation for CO, no previous studyhas investigated the cross-level interaction betweenorganizational CO and employee CO in relation

to employee performance. Thus, the overarchingresearch question of this study is: Under whatcircumstances will firm CO induce autonomous(versus controlled) motivation?

While taking into account a wide range ofindividual and organizational factors, we iden-tify performance-related rewards as the keycontingency variable to address our researchquestion (Gerhart and Fang, 2015). We advancethat performance-contingent rewards may helpdirect firm CO towards increasing employees’autonomous motivation for CO, and have apositive effect on the internalization of firm CO(Gagne and Deci, 2005; Ryan, Mims and Koest-ner, 1983). To date, there is limited knowledge ofthe role of performance-related rewards in COresearch; existing studies advancing a direct linkbetween performance-related rewards, employeeCO and employee performance often reportnon-significant results (e.g. Liao and Chuang2004; MacKenzie, Podsakoff and Rich, 2001;Schmitz and Ganesan 2014). Recent contributionshave suggested adopting a contingency approachwhen studying the effectiveness of performanceincentives (Gagne and Deci 2005; Gerhart andFang, 2015). Following this line of research, inthis study we examine how the interplay betweenperformance-contingent rewards, firm CO andemployee CO affects employee performance.

We test our conceptual framework through twomultilevel studies consisting of three independentsamples composed of 979 employees and 201 topmanagement team members from 132 firms. Weuse two different contexts, back-office employeesin Study 1 and customer-contact employees fromvarious business-to-business (B2B) companies inStudy 2, to strengthen the external validity of ourfindings. In Study 1, we find that employee CO ispositively related to employee performance whenfirm CO is low, but not when firm CO is high. InStudy 2 we replicate this result and additionallyfind that performance-contingent rewards coun-teract the buffering effect of firm CO, such thatwhen these rewards are present, the positive rela-tionship between employee CO and performanceholds under both high and low levels of firm CO.

Our work provides three major contributionsto the management literature (see Table 1). First,we identify an interesting substitution effectbetween the emphasis a firm places on CO andthe extent to which employees perceive it as anindividual success factor. Our model suggests that

© 2017 British Academy of Management.

Employee and Firm Customer Orientation 3

Table 1. Overview of existing literature and contributions of this study

Key studies Key findings Research gap Contributions of this study

Influence offirm’s CO onemployees’ CO

Boles et al., 2001Cross et al., 2007Guenzi, De Luca andTroilo, 2011

Liao and Subramony,2008

Williams and Attaway,1996

Firm CO, both in terms oftop management teams’CO and organizational CO,increases employees’ CO.

Previous research didnot differentiatebetween controlledand autonomousmotivation ofemployees for CO,nor did it consider theimplications of thesedifferent kinds ofmotivation.

Contribution 1: Identifyingand explaining a tensionbetween the firm’semphasis on CO andemployees’internalization of CO andinvestigating itsimplications.

Influence ofemployees’ COon employees’performance

Boles et al., 2001Cross et al., 2007Donavan, Brown andMowen, 2004

Franke and Park, 2006Kennedy, Lassk andGoolsby, 2002

Zablah et al., 2012

Employees’ CO increasesseveral desirable joboutcomes, includingemployees’ performance,both for back-office andcustomer-contactemployees in service andsales contexts.

Meta-analyticinvestigations foundunexplainedheterogeneity in therelationship betweenemployees’ CO andtheir performance.

Contribution 2:Investigating themoderating role of thefirm’s CO in therelationship betweenemployees’ CO and theirperformance.

Influence ofperformance-contingentrewards onemployees’ COand employees’performance

Liao and Chuang, 2004MacKenzie, Podsakoffand Rich, 2001

Schmitz and Ganesan,2014

Previous research found nosignificant associationsbetween performance-contingent rewards and (a)store-level CO, (b)employees’ customer-directed efforts and (c)employee performance.

Previous research didnot consider theinterplay betweenperformance-contingent rewardsand the controlledmotivation of firmCO.

Contribution 3: Resolvingthe tension between thefirm’s emphasis on COand employees’internalization of CO byinvestigating themoderating role ofperformance-contingentrewards in therelationship between thefirm’s CO, employees’ COand employees’performance.

the failure to consider these two factors simul-taneously may jeopardize the implementation ofcustomer-oriented initiatives. Second, we empiri-cally support the moderating role of firm CO asa new source of heterogeneity in the relationshipbetween employees’ CO and their performance,and theoretically explain this effect by consideringthe different motivational states of employees.

Third, our study brings new knowledge con-cerning the role of performance-contingentrewards in customer-oriented firms; our con-tingency approach complements and extendsprevious studies focusing on the direct effect ofrewards. Our study further informs the design ofperformance-contingent rewards by reporting theeffectiveness of a specific type of incentive (i.e.directly performance-salient incentives). Also, ourresults offer managers a unified framework forunderstanding and managing the complexity ofautonomous and controlled motivations withinCO initiatives.

Conceptual background and hypothesesBaseline relationships from prior research

Employee CO, defined as an attitude and aset of behaviours to meet customer needs onthe job (e.g. Brach et al., 2015; Zablah et al.,2012), is an important antecedent of individualperformance. For example, customer-contactemployees with a high CO are more likely toidentify a customer’s needs and the services orproducts that will best solve customer problems,thus enhancing their performance (Boles et al.,2001; Cross et al., 2007). However, even thosewho have no direct customer contact should focustheir efforts on external customers in order tofulfil their job expectations (Kennedy, Lassk andGoolsby, 2002; Lin et al., 2016). CO affects theperformance of back-office employees by motivat-ing collaborative exchanges with customer-contact employees (Liao and Subramony,2008), and enhances job satisfaction, commitment



and organizational citizenship behaviours (Dona-van, Brown and Mowen, 2004), which will furtherimprove employee performance.

Scholars further suggest that firm CO, de-fined as organization-wide culture, practicesand processes that help to put the customer’sinterests first (Deshpande, Farley and Webster,1993), is transferred to employees through thedissemination of shared values and behaviouralnorms (Stock and Hoyer, 2005). In line withthese suggestions, previous research indicates thatfirm CO is positively related to the CO of bothcustomer-contact and back-office employees. Liaoand Subramony (2008) used the CO of the topmanagement team as a proxy for firm CO andfound that individual employees in both customer-contact and back office roles are motivated to bemore customer oriented by the top managementteam. Other studies have revealed that a customer-oriented organizational culture and processespositively affect employee CO (e.g. Guenzi, DeLuca and Troilo, 2011; Williams and Attaway,1996).

The studies of Boles et al. (2001) and Cross et al.(2007) combined the two effects, indicating thatfirm CO influences employee performance via em-ployee CO, while not formally testing for an indi-rect effect. In sum, a review of key studies providesample support for the notion that employee COis positively related to employee performance, firmCO is positively related to employee CO, and firmCOmay have a positive indirect effect on employeeperformance via employee CO. We position ourstudy in this literature by using these relationshipsas baseline effects in our analyses (see Figure 1).

Substitution between firm and employee CO

In the preceding subsection, we reviewed the COimplementation research, which indicates that firmCO is an important antecedent of employee CO.While generally supporting the effectiveness ofexternal motivation on individual behaviour, SDTmakes a key distinction between autonomous andcontrolled motivation, both stemming from exter-nal sources (Gagne and Deci, 2005). Autonomousmotivation means acting on one’s own volitionand experiencing a sense of choice in adopting acertain behaviour (Ryan and Deci, 2000). We con-sider firm CO as a possible driver of autonomousmotivation for CO because previous researchfound that at least some employees unreservedly

adopted a CO advocated by the firm (Harris andOgbonna, 2000). Controlled motivation meansacting under external pressure and experiencingno choice in adopting a certain behaviour (Ryanand Deci, 2000). Given that CO initiatives ofteninstil a sense of pressure, which urges employeesto adopt CO, we consider firm CO to be alsoa possible driver of controlled motivation forCO.

For instance, the terminology used to describecustomer-oriented initiatives often reflects thecontrolled motivation concept: customer-orientedvalues and norms are ‘inculcated’ (Lichtenthaland Wilson 1992, p. 194), and employees are‘indoctrinated’ (Gebhardt, Carpenter and Sherry,2006, p. 48). Indeed, the need for employees tokeep their jobs, meet managers’ expectations andembrace the organizational culture may pushthem to comply with CO, irrespective of theirautonomous motivation towards the behaviour.Thus, the extrinsic motivation of firm CO varies inits degree of self-determination and may be both adriver of autonomous and controlled motivationfor CO (Gagne and Deci, 2005). In contrast,the intrinsic motivation of employees’ personalinterest in CO is invariantly self-determined andthus solely a driver of autonomous motivation forCO (Gagne and Deci, 2005).

Following Amabile (1993), Cerasoli, Nicklinand Ford (2014), Gerhart and Fang (2015) andGrant et al. (2011), among others, we conceptu-alize autonomous and controlled motivations asorthogonal in the work context (see Figure 2).In support for this conceptualization, empiricalstudies have found – based on non-significantcorrelations – that autonomous and controlledmotivations are independent of each other, andconcluded that these two motivations ‘are essen-tially orthogonal’ (Amabile et al., 1994, p. 958).In line with recent meta-analytic investigations(Cerasoli, Nicklin and Ford, 2014), we proposethat both autonomous and controlled motivationsmay lead to a desired behaviour (e.g. employeeCO). The effectiveness of such behaviour, when itoccurs, is another matter as the different kinds ofmotivation that lead to the desired behaviour mayalso determine its ability to produce desired out-comes (Grant et al., 2011). Thus, it is importantto understand how employees’ motivation for COinfluences the effectiveness of their CO. We expectemployee CO to be more strongly related toperformance under purely autonomous



Figure 1. Conceptual framework: the interplay between firm and employee customer orientation

motivation. In this situation, we expect thebenefits of CO for individual performance to ex-ceed those generated when employees experiencerelatively controlled motivation or high levels ofboth autonomous and controlled motivation.

The strongest link between employee CO andemployee performance should occur when moti-vation is purely autonomous, as employees havean inherent personal interest in CO in spite of thelow level of firm CO. Under these circumstances,employees are more likely to engage in the mosteffective forms of CO, as their autonomous mo-tivation helps them maintain attention, interest,energy and enthusiasm, thus facilitating effectiveeffort (Gagne and Deci, 2005). Indeed, Ryan andDeci (2000, p. 69) argue that themore autonomousthe motivation, the higher its quality and the moreauthentic it is, which means that employees ‘havemore interest, excitement, and confidence, whichin turn is manifest . . . as enhanced performance’.In addition, low levels of firm CO should makeindividual CO behaviours stand out more,granting additional performance advantages to

the employees promoting and adopting suchbehaviours, relative to others.At the opposite extreme, when employee’s

inherent personal interest in CO is low despite thehigh firm CO, we expect a weaker link betweenemployee CO and employee performance. Thisis because low levels of personal interest in CO,despite the high emphasis on CO by the firm, islikely to lead employees towards mere compliance,which may often result in an uninspired approachto addressing customer needs, and low levels of ef-fort towards customer-related obligations (Gagneand Deci, 2005). Therefore, the combination oflow personal interest in CO and high firm COis likely to result in firm CO being perceived ascontrolled motivation, which is met by a certaindegree of resistance by the employee (Harris andOgbonna 2000).Even when both firm CO and employees’

personal interest in CO are high, we expect thatCO may still be less strongly related to perfor-mance than under pure inherently autonomousmotivation. We propose that when both individual



Figure 2. Autonomous and controlled motivations for employee CO

Notes: Based on Grant et al. (2011). Although earlier work in SDT treats autonomous and controlled motivations as opposite poles ofa single continuum, there is growing consensus with regard to conceptualizing these motivations as orthogonal in the work context (e.g.Amabile, 1993; Cerasoli, Nicklin and Ford, 2014; Gerhart and Fang, 2015). Empirically, Amabile et al. (1994, p. 958) and Grant et al.(2011, p. 245) found in several samples that autonomous and controlled motivations are independent. We expect the effectiveness ofemployee CO (i.e. its performance effect) to be highest under conditions of purely autonomous motivation (grey area)

and firm CO motivations are high, employeesmay experience motivational ambivalence andconflicting goals (Fong and Tiedens, 2002; Grantet al., 2011). Autonomous motivation will pullemployees in the direction of CO, as they viewit as bringing inherent enjoyment and fulfilmentto their work (Grant, 2008). In contrast, con-trolled motivation provides employees with aperception of being externally directed (Gagneand Deci, 2005), which may reduce the willingnessto allocate resources and efforts to engage ineffective forms of CO. In addition, higher levelsof controlled motivation will create an internalenvironment whereby CO is socially expected; inthis context, customer-oriented individuals areless likely to emerge or to attribute unique perfor-mance advantages to their CO. Thus, the presenceof both autonomous and controlled motivationsis likely to create a motivational ambivalencethat can at least partially reduce the benefits ofhigh autonomous motivation alone (Grant et al.,2011).

Complementary explanations for why theeffectiveness of CO may be highest under pure

autonomous motivation are offered by emotionallabour theory and the CO literature. Emotionallabour theory differentiates between surface actingand deep acting as two outcomes of employees’CO (Yoo and Arnold 2016) and suggests thatthe link between employee CO and performanceis stronger when the emotion regulation of em-ployees is more authentic (i.e. deep acting: Allenet al., 2010; Brach et al., 2015). As autonomousmotivation is associated with higher internaliza-tion of behaviours and thus with authenticity,we expect employees’ CO to be more stronglyassociated with their performance if they arefully autonomously motivated for CO. The COliterature echoes this idea by highlighting thepositive performance effects of customer-orientedauthenticity (Hennig-Thurau et al., 2006).

In summary, based on SDT, we expect employeeCO to be linked to autonomous motivation, andfirm CO to be linked to both autonomous andcontrolled motivation. Building on this, we pre-dict that employee COwill bemost strongly associ-ated with performance when employees experiencehigh autonomous and low controlled motivation



due to the experience of choice, energy and enthu-siasm. This condition is more likely characterizedby high personal interest for CO and low firm CO.However, the performance payoff of employee COwill diminishwhenmotivation is both autonomousand controlled (i.e. high personal interest for CO,high firm CO), owing to ambivalence and asso-ciated self-regulatory efforts and stress. The pay-off from employee CO is also likely to suffer whenmotivation is relatively controlled (i.e. low per-sonal interest for CO, high firm CO), owing to thepredominant effect of perceived external pressure.Thus:

H1:Other things being equal, the firm’s COneg-atively moderates the positive relationship be-tween employees’ CO and their performance,such that the higher the firm’s CO, the weakerthe relationship.

Performance-contingent rewards as a boundarycondition

Performance-contingent rewards are defined asthe performance-related compensation receivedby employees (e.g. Procter et al., 1993). Previousresearch has found no significant associations be-tween performance-contingent rewards and store-level CO (Liao and Chuang, 2004), employees’customer-directed efforts (Schmitz and Ganesan,2014) and employee performance (MacKenzie,Podsakoff and Rich, 2001). Thus, we treat theserewards as exogenous to a firm’s CO, as theycan be adopted by firms with either high or lowCO.1

An important aspect of SDT is that ‘extrinsicmotivation can vary in the degree to which it isautonomous versus controlled’ (Gagne and Deci2005, p. 334), and that performance-contingentrewards ‘may actually have a net positive effecton autonomous motivation’ (Gerhart and Fang,2015, p. 505). This corresponds to the centralproposition of SDT that ‘when a socially-valuedactivity is prompted by extrinsic motivation in anautonomy-supportive social context, people willtend to internalize and integrate the regulation ofthat behaviour’ (Gagne and Deci, 2005, p. 349).This view challenges the strong assumption in

1This point is reinforced by the non-significant correlationbetween organizational CO and performance-contingentrewards that we found in our data.

previous theories on work motivation, such ascognitive evaluation theory, according to whichextrinsic rewards are always detrimental for theindividual internalization of focal behaviours(Deci, Koestner and Ryan, 1999; Gerhart andFang, 2015). Thus, in line with SDT, we expectperformance-contingent rewards to mitigate thesubstitution effect between employee CO andfirm CO. We advance three related theoreticalexplanations to articulate our hypothesis.First, performance-contingent rewards foster

the perception of competence among employeesand provide them with more satisfaction of theirneed for individual autonomy (Hohenberg andHomburg, 2016; Ryan,Mims andKoestner, 1983).This has a positive effect on the internalizationof extrinsic motivation, which therefore decreasesthe chances that firm CO is perceived as a formof controlled motivation. Second, the marketingliterature typically suggests that the superior valuegenerated by a CO is shared between the firm andits customers (Narver and Slater, 1990). While cus-tomers benefit from better and more customizedservices, firms benefit from superior customer,market and financial performance. In this context,the introduction of performance-contingent re-wards represents a mechanism that employees canleverage to appropriate a share of the value thatthey generate through their customer-orientedbehaviour, which otherwise would only benefitthe firm and the customer. This again should helpin the internalization of the otherwise relativelycontrolled motivation of firm CO. Third, a recentmeta-analysis found that directly performance-salient incentives, such as performance-contingentrewards, ‘impart a competence-boosting message,thus also boosting intrinsic motivation’ (Cerasoli,Nicklin and Ford, 2014, p. 983). In line with thisfinding, Gerhart and Fang (2015, p. 498) positthat: ‘employees generally feel inequitably treatedif extrinsic rewards do not correspond to theirperformance, and inequity will negatively influ-ence motivation and creativity’. This can reinforcethe mixed messages associated with ambivalentmotivation (Grant et al., 2011) because employeeswill be more likely to interpret an ambivalentmotivation as externally controlled, and will beless creative in addressing and satisfying customerneeds, both factors leading to a weaker linkbetween their individual CO and performance.Following this reasoning, the substitution effectbetween firm CO and employee CO in the link



with employee performance should be observedin conditions of low performance-contingent re-wards, but not in conditions of high-performancerewards:

H2: Other things being equal, the substitutioneffect of the firm’s CO on the relationship be-tween employees’ CO and their performance isweaker when employees receive higher levels ofperformance-contingent rewards.

Study 1Data collection and measures

For Study 1, we gathered data from a conveniencesample of the top management teams, back-officeemployees and managerial key informants in77 German manufacturing firms from variousindustries taking part in executive education atthe first author’s university. All firms receiveda benchmark report as an incentive. We pre-tested the measurement scales with seven topmanagement team members and 15 employeesduring a company workshop. None of the pre-testparticipants took part in the main study. Theexclusion of seven firms because of missing dataled to a final sample of matched data from 201 topmanagement team members and 813 back-officeemployees from 70 firms. We used multiple datasources to avoid same-source bias. Specifically, weused online surveys to collect data on firm COfrom top management team members and dataon employee CO, gender, age, education, tenureand performance from employees. We collecteddata on numbers of employee and turnoverfrom company records. We found no systematicdifferences in the means for demographics orother study constructs between early and laterespondents.

Appendix S1 provides an overview of all mea-surement items and reliability measures; Table 2displays means, standard deviations and averagevariance extracted. All scales had satisfactoryCronbach’s alpha values. We used the employeeCO scale from Liao and Subramony (2008) be-cause this measure is uniquely suitable for employ-ees with no direct customer contact. In addition,we aggregated the CO scores of top managementteam members, measured using the same scaleas in Liao and Subramony (2008), to capture thecustomer-related attitudes of senior managers as a

proxy for the firm’s CO. In fact, employees withoutdirect customer contact are likely to look to thetop management team as a signifier of the firm’sCO (Liao and Subramony, 2008).We obtained sta-tistical support for aggregating top managementteam members’ answers at the firm level (ICC[1] =0.36; ICC[2]= 0.65).We assessed employee perfor-mance with a self-report scale based on the mea-sure employed byWieseke et al. (2009).We applieda subjective scale to compare the performance ofemployees from different firms (Homburg, Mullerand Klarmann, 2011) and a self-report measurebecause many participating firms would not allowmanagers to share employees’ individual perfor-mance information. We adjusted the performancemeasure to capture employees’ performance rela-tive to colleagues from the same firm (i.e. employeeperformance = individual performance−meanindividual performance within the firm).2

We included a number of potentially importantfactors as control variables both at the firm leveland employee level: organizational formalization,measured with the scale of Jansen, Van Den Boschand Volberda (2006), because it limits employeeautonomy and thus may influence the employeeCO–performance relationship; employee jobresources, captured by the quality of internalcooperation, because in addition to CO as acrucial job resource for employees (Zablah et al.,2012), the quality of contact to and collabora-tion with internal partners is an important jobresource, which may affect both employee CO andperformance (Plouffe et al., 2016); employee jobdemand, measured with an item based on Dwyerand Ganster (1991), because the demandingnessof work-related activities may both directly affectemployee CO and performance and influence theemployee CO–performance relationship (Zablahet al., 2012); employee job stress, measured asthe number of sick days (e.g. Dwyer and Ganster,1991), because stress may negatively affect bothemployee CO and performance (Zablah et al.,2012); employee job engagement, measured withan item based on Rich, Lepine and Crawford(2010), because this positive, work-relatedaffective-motivational state of mind may increase

2The correlation between the adjusted and the unadjustedmeasures of performance is very high (r = 0.93, p <0.001), and using an unadjusted performance measure ledto similar results in the main analysis and the robustnesstests.



Table2.

Descriptive

statistics

andcorrelations

inbo

thstud

ies

Variables

12

34

56

78

910

1112

1314

1516

1718

19

Level2:

Firm

a

1.Firm

CO

–−0

.03

0.15*

−0.01

0.07*

–0.10

*0.04

0.03

0.08*

–0.20

*–

0.02

0.05

−0.05

0.08*

0.00

b

2.Firm

selling

orientation

−0.19 *

––

––

––

––

––

––

––

––

–3.

Organ

izationa

lform

alization

0.44

*−0

.25 *

0.27

*0.15*

−0.04

–−0

.05

−0.04

0.04

−0.05

–−0

.16 *

–−0

.24 *

−0.31 *

−0.24 *

−0.11 *

0.00

b

4.Num

berof

employ

ees

−0.02

0.07

0.12

0.46*

−0.03

–0.01

0.02

0.06

−0.02

–−0

.08 *

–0.04

0.07

*−0

.15 *

0.17

*0.00

b

5.Turno

verin

theprevious

year

−0.21 *

−0.06

−0.01

0.29

*0.07

*–

0.06

−0.08 *

0.04

0.07*

–0.18

*–

−0.02

0.13*

−0.19 *

0.27

*0.00

b

Level1:

Employee

6.Employ

eeCO

0.24*

0.04

0.01

0.05

−0.23 *

–0.20

*−0

.26 *

−0.10 *

0.25

*–

0.08

*–

−0.07 *

0.17*

0.06

0.12*

0.12

*7.

Employ

eeselling

orientation

−0.13

0.36*

−0.02

0.05

0.04

−0.34 *

––

––

––

––

––

––

8.Employ

eejobresources

0.41*

−0.26 *

0.25

*0.05

−0.13

0.27*

−0.19 *

−0.17 *

−0.15 *

0.17

*–

−0.04

–0.03

−0.02

0.02

0.04

0.11*

9.Employ

eejobdeman

ds0.29*

0.04

0.19

*0.10

0.07

0.03

0.15

0.20*

0.16*

−0.18 *

–0.09

*–

0.06

0.02

−0.07 *

−0.08 *

−0.20 *

10.Employ

eejobstress

––

––

––

––

–−0

.12 *

–0.00

–−0

.10 *

−0.03

0.06

0.01

−0.20 *

11.Employ

eejobengagement

––

––

––

––

––

–0.08*

–−0

.04

−0.03

0.01

0.04

0.11*

12.Employ

eeem

otiona

llab

our

0.13

−0.18 *

0.07

0.01

−0.02

0.12

0.05

0.18*

0.11

––

––

––

––

–13

.Co−

workerCO

0.26*

0.05

0.01

0.05

−0.25 *

0.40

*−0

.02

0.19

*0.09

––

0.11

–−0

.14 *

0.03

0.10*

0.12

*−0

.04

14.Perform

ance-con

ting

ent

rewards

−0.11

−0.11

−0.13

0.11

0.06

−0.04

−0.06

−0.09

−0.19 *

––

−0.01

0.01

––

––

–

15.Employ

eegend

er0.06

0.02

−0.07

0.02

0.02

0.07

−0.15

−0.05

−0.02

––

−0.10

0.06

0.03

−0.08 *

0.16*

−0.07 *

−0.03

16.Employ

eeage

0.02

−0.01

0.12

−0.08

−0.02

0.08

−0.14

0.18**

0.14

––

0.04

−0.11

0.01

0.06

0.01

0.55*

−0.04

17.Employ

eeeducation

0.04

−0.04

−0.03

0.11

0.10

−0.17 *

−0.06

−0.04

0.16

*–

–−0

.06

−0.09

0.05

−0.10

0.01

−0.22 *

−0.08 *

18.Employ

eetenu

re−0

.01

−0.16 *

0.10

0.05

0.08

−0.02

−0.15

0.15

−0.07

––

0.04

−0.10

0.08

0.12

0.42*

−0.03

−0.07 *

19.Employ

eeperforman

ce0.22

*−0

.19 *

0.07

−0.01

−0.07

0.41*

−0.29 *

0.15

−0.05

––

0.06

0.10

0.14

0.00

0.06

−0.06

0.05

Stud

y1:

mean

6.45

–4.53

6.71

18.81

5.95

–5.40

2.29

3.31

5.41

–5.95

–0.69

39.56

3.33

11.48

0.00

Stud

y1:

stan

dard

deviation

0.49

–0.54

1.25

2.27

0.89

–1.32

1.16

7.72

1.45

–0.28

–0.45

8.97

1.70

9.11

24.35

Stud

y1:

averagevarian

ceextracted

0.52

–0.66

––

0.57

––

––

––

––

––

––

–

Stud

y2:

mean

5.25

2.72

4.78

4.15

4.47

6.38

2.06

3.75

0.79

––

5.11

6.38

0.32

0.91

44.84

4.41

10.12

5.30

Stud

y2:

stan

dard

deviation

0.98

0.88

1.16

1.44

1.39

0.64

1.03

0.75

0.13

––

1.19

0.58

0.26

0.28

9.38

1.11

8.18

1.02

Stud

y2:

averagevarian

ceextracted

0.53

0.52

––

0.59

0.59

0.69

–0.61

––

––

––

––

––

0.55

Notes:S

tudy

1(2)c

orrelation

sarerepo

rted

abov

e(below

)the

diagon

al.N

Stud

y1=

813em

ploy

eesan

d70

firms,N

Stud

y2=

166em

ploy

eesan

d62

firms.**

p<

0.01

,*p

<0.05

.Significan

ceisba

sedon

two-tailedtests.The

measurementisexplainedin

theApp

endix.

aCorrelation

sareba

sedon

scores

disagg

regatedperem

ploy

ee.

bStud

y1measuresem

ploy

ees’performan

cerelative

toothers

inthesamefirm.



both employee CO and performance (Zablahet al., 2012); and co-worker CO because theCO of other employees may increase employeeperformance (Menguc et al., 2016). In addition,we control for number of employees, turnoverin the previous year, and employee gender, age,education and tenure.

Measurement model and common method bias

Two confirmatory factor analyses (CFAs) of thetop management and employee data indicateda good fit between the measurement model andthe data (top management: χ2(2) = 3.57; CFI =0.99; RMSEA = 0.06; employees: χ2(3) = 7.65;CFI = 0.99; RMSEA = 0.04). We combinedmultiple sources and calculated deviation scoresfor the dependent variable (i.e. employee perfor-mance) to reduce single-source bias and commonmethod bias. We also constructed the items andquestionnaire as concisely as possible, minimizedpotential comprehension problems with pre-testsand included moderating effects in our statisti-cal analyses, thereby reducing the potential forcommon method bias.

Data analysis strategy

Because of the multilevel nature of our data(employees are nested within companies, e.g.Kozlowski and Klein, 2000), we applied hier-archical linear modelling (HLM) with robustmaximum likelihood estimation (MLE) to test ourhypotheses and used the log-likelihood differencetest to compare the nested models (Raudenbushand Bryk, 2002). The sample sizes of both thehigher-level sample (70 companies) and the lower-level sample (11.61 employees for each company)are in line with recommendations from simulationstudies (Maas and Hox, 2005), and higher thanin other multilevel studies (e.g. Fong and Snape,2015; van der Borgh, de Jong and Nijssen, 2015).Following the suggestion of Enders and Tofighi(2007), we applied group-mean centring for allexploratory variables involved in cross-level inter-actions (i.e. employee CO), and all other predictorvariables at level 1 and level 2 were grand-meancentred on their respective levels.3

3We replicated our analyses with a grand-mean centringstrategy: All the results remained stable.

Results

The results are shown in Table 3. InModel 1.1, firm CO is positively related toemployee CO (γ = 0.14, p < 0.001). In Model 1.2,a positive relationship is found between employees’CO and their performance (γ = 1.99, p < 0.007).In Model 1.3, the cross-level interaction betweenemployee CO and firm CO is significant (γ =−3.78, p< 0.001), yielding support for Hypothesis1. Simple slope analysis shows that the relationshipbetween employee CO and performance is positiveand significant at low levels of firm CO (γ = 3.68,p < 0.001), but not at high levels of firm CO (γ =−0.03, p = 0.96) (see Figure 3).

Robustness tests and supplementary analysis

We replicated our analyses with a structural equa-tion model to rule out the possibility of measure-ment error biasing our results. As a supplemen-tary analysis, we further tested for the conditionalindirect effect of firm CO on employee perfor-mance. We used a parsimonious model and a ro-bustMLE. Themain effectsmodel showed good fit(χ2 (75)= 229.59, CFI= 0.96, RMSEA= 0.05). Inlinewith suggestions fromprevious research (Boleset al., 2001; Cross et al., 2007), employee CO fullymediates the effect of firm CO on employee per-formance (γ = 0.52, p < 0.09, 95% CI = 0.02;1.00).4 Adding the interaction between firm COand employee CO significantly improves themodelfit (−2LL change= 3.37, p< 0.07) and its effect onemployee performance is significant (γ = −5.08,p < 0.07). The postulated moderation effect fur-ther qualifies the indirect effect of firm CO on em-ployee performance: this indirect effect is positiveand significant only if firmCO is low (γ = 0.80, p<

0.05, 95% CI = 0.04; 1.57), but not when firm COis high (γ = 0.24, p = 0.31, 95% CI= −0.15; 0.63).

Discussion

Study 1 identifies a substitution effect whereby firmCO buffers the relationship between employees’CO and their performance. Specifically, we findthat employee CO is not related to employee per-formance when firm CO is high. Moreover, posthoc analyses on the indirect effect indicate that

4All confidence intervals (CIs) for mediation effects cor-respond to directional one-tailed hypothesis tests.


Employee and Firm Customer Orientation 11Table3.

HLM

resultsexplaining

employee

CO

andem

ployee

performan

ce

Stud

y1

Stud

y2

Mod

el1.1

Employ

eeCO

Mod

el1.2

Employ

eeperforman

ce

Mod

el1.3

Employ

eeperforman

ceMod

el2.1

Employ

eeCO

Mod

el2.2

Employ

eeperforman

ce

Mod

el2.3

Employ

eeperforman

ce

Mod

el2.4

Employ

eeperforman

ce

Levelan

dvariable

γSE

γSE

γSE

γSE

γSE

γSE

γSE

Intercept

5.98**

0.04

−0.23

0.44

−0.22

0.44

6.38**

0.05

5.29

**0.07

5.29

**0.07

5.29

**0.07

Level2:

Firm

Firm

CO

0.14**

0.04

0.55

0.49

0.53

0.50

0.13*

0.06

0.18

0.12

0.17

0.11

0.15

0.11

Firm

selling

orientation

––

––

––

0.14

*0.06

−0.17

0.11

−0.15

0.10

−0.13

0.10

Organ

izationa

lformalization

0.03

0.05

−0.90

0.91

−0.90

0.92

−0.04

0.04

−0.03

0.06

−0.02

0.06

−0.01

0.06

Num

berof

employ

ees

−0.05†

0.02

0.37

0.25

0.36

0.25

0.06

†0.03

0.00

0.05

0.00

0.04

−0.01

0.04

Turno

verin

theprevious

year

0.02

†0.01

−0.03

0.17

−0.03

0.17

−0.07

0.04

0.02

0.06

0.02

0.06

0.02

0.06

Level1:

Employee

Employ

eeCO

––

1.99**

0.73

1.83

**0.56

––

1.05

**0.31

0.84

**0.29

1.00

**0.29

Employ

eeselling

orientation

––

––

––

−0.22 **

0.06

−0.09

0.10

−0.10

0.11

−0.16

0.10

Employ

eejobresources

0.09**

0.03

0.73

0.49

0.69

0.49

0.11

0.08

−0.04

0.11

−0.03

0.12

−0.07

0.12

Employ

eejobdeman

ds−0

.14 **

0.03

−3.07 **

0.84

−3.06 **

0.83

−0.09

0.38

−0.27

0.66

−0.60

0.64

−0.19

0.66

Employ

eejobstress

−0.01

0.01

−0.51 **

0.12

−0.51 **

0.12

––

––

––

––

Employ

eejobengagement

0.10**

0.02

0.67

0.45

0.63

0.46

––

––

––

––

Employ

eeem

otiona

llab

our

––

––

––

0.06

0.04

−0.03

0.06

−0.01

0.06

−0.01

0.06

Co-workerCO

––

−2.14

1.49

−1.97

1.54

––

0.48*

0.18

0.47

*0.18

0.47

**0.17

Perform

ance-con

ting

ent

rewards

––

––

––

0.04

0.30

0.65

0.50

0.78

0.50

0.03

0.38

Employ

eegend

er−0

.12†

0.06

−1.99

1.77

−1.81

1.77

0.01

0.18

−0.21

0.26

−0.15

0.27

−0.03

0.27

Employ

eeage

0.01

**0.00

−0.03

0.07

−0.03

0.07

0.00

0.01

0.00

0.01

0.00

0.01

−0.01

0.01

Employ

eeeducation

0.05**

0.02

−1.37†

0.74

−1.41†

0.74

−0.09 *

0.04

−0.02

0.08

−0.02

0.07

−0.01

0.07

Employ

eetenu

re0.01

0.00

−0.25†

0.13

−0.25†

0.13

0.00

0.01

0.00

0.01

0.01

0.01

0.01

0.01

Two-way

interactions

Employ

eeco

×firm

co−3

.78 **

1.13

−0.54 *

0.23

−0.61 **

0.18

Employ

eeco

×performan

ce−c

onting

ent

rewards

0.40

0.50

Firm

co×

performan

ce−c

onting

ent

rewards

−0.79 *

0.34

Three-w

ayinteraction

Employ

eeco

×firm

co×

performan

ce−c

onting

ent

rewards

1.57

**0.45

−2log-lik

elihoo

d19

73.74

7415

.23

7411

.95

239.46

430.43

419.15

406.58

Cha

ngein

fit3.29

†11

.29 **

12.56 **

Pseud

oR2

0.17

0.09

0.10

0.31

0.25

0.30

0.35

Notes:N

Stud

y1=

813em

ploy

eesan

d70

firms,N

Stud

y2=

166em

ploy

eesan

d62

firms.**

p<

0.01

,*p

<0.05

,†p

<0.10

.Significan

ceisba

sedon

two-tailedtests;un

stan

dardized

results

withrobu

ststan

dard

errors.C

O=

custom

erorientation.

Wecalculated

within-levelP

seud

oR2withtheform

ulaof

Snijd

ersan

dBosker(199

9).W

eap

pliedgrou

p-meancentring

forall

exploratoryvariablesinvo

lved

incross-levelinteraction

s,allo

ther

predictorvariablesat

level1

andlevel2

weregran

d-meancentredon

theirrespective

levels



Employee Customer Orientation × Firm Customer Orientation on Employee Performance

Firm CO low

Firm CO high

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

Employee CO low Employee CO high

Em

ploy

ee P

erfo

rman

ce

Figure 3. The interplay between employee and firm customer orientation in Study 1

Notes: CO = customer orientation. The dotted line represents a non-significant effect in Figure 3

firmCOdoes not indirectly contribute to employeeperformance through employee CO when firm COis high. Given these findings, the question thatarises is whether managers are able to resolve thissubstitution effect and attain the benefits of firmCO without generating undesired consequencesfor employees, namely the perception of a weaklink between CO and individual performance. Weexplicitly address this question in Study 2.

Study 2Data collection and measures

In our second study, we contacted 1924 salesemployees using a database provided by theSwiss Professional Marketing Association. Thesesalespeople work for various B2B companieswith different levels of firm CO and with variouscompensation schemes, ranging from 100% fixedcompensation to 100% variable compensation.We chose a B2B context because employee COis of the greatest importance for a B2B firm’smarketing strategy (e.g. Gummesson, 2004). Afterone follow-up, we received 382 fully completedquestionnaires (20% response rate). We did notidentify systematic differences in demographicsand constructs means between early and late re-spondents. To reduce the risk of common methodbias, we only retained responses from 62 firms forwhich more than one employee replied in our mainanalyses. In taking these steps, we followed the

recommendation of Podsakoff et al. (2003) todifferentiate the measurement sources of thevariables. As a consequence, our main analysesare based on a sample of 166 employees from 62firms. We also replicated our analyses with thecombined sample of all respondents (n = 382) asa robustness test.

We pre-tested all measurement scales with 24sales managers at a professional developmentworkshop. Appendix S2 provides an overview ofall measurement items and reliability measures;Table 2 displays means, standard deviations andaverage variance extracted for the main sample.5

All scales had satisfactory Cronbach’s alpha val-ues. We used Thomas, Soutar and Ryan’s (2001)scale to assess the CO of employees with directcustomer contact. We measured firm CO withthe scale used by Deshpande, Farley and Webster(1993). The ICCs provided statistical supportfor aggregation at the firm level (ICC[1] = 0.62;ICC[2] = 0.81). We assessed employee perfor-mance with a scale suitable for sales employees,adapted from Homburg, Muller and Klarmann(2011). All employees provided information re-garding their performance-contingent rewards,operationalized as a continuous variable rangingfrom 100% for straight commission (salary hasno role in the compensation plan) to 0% (salaryhas an exclusive role in the compensation plan)

5Further information about the validation sample is avail-able upon request from the authors.



(John and Weitz, 1989). We controlled for thefirm’s selling orientation (new measure; ICC[1] =0.64; ICC[2] = 0.82), organizational formalization(based on Jansen, Van Den Bosch and Volberda,2006), employee job resources (based on Plouffeet al., 2016), employee job demands (based onMarshall, Moncrief and Lassk, 1999; Moncriefand Marshall, 2005), employee emotional labour(based on Hennig-Thurau et al., 2006), co-workerCO (Menguc et al., 2016), number of employees,turnover in the previous year, and employees’selling orientation (Thomas, Soutar and Ryan,2001), gender, age, education and tenure.

Measurement model and common method bias

The CFA indicated a good fit of the measurementmodel with the data (χ2(194) = 350.98; CFI =0.89; RMSEA = 0.07). We used the same methodsas in Study 1 to reduce the potential for commonmethod bias. In addition – and because we ob-tained several multi-item constructs from the samesource in Study 2 – we estimated a further CFAmodel that included a latent method factor withpaths to each item (Podsakoff et al., 2003). Allsubstantive factor loadings remained significant,and the method factor accounted for only 5.32%of variance.

Data analysis strategy

Because employees are nested within differentcompanies, the data structure suggests the use ofmulti-level modelling. While the higher-level sam-ple size (62 companies) is well in line with commonstandards for multilevel models, the lower-levelsample size is quite small (2.68 employees for eachcompany). However, simulation studies justifythe use of multi-level modelling despite the smalllower-level sample size. For example, Maas andHox (2005, p. 86) argued that ‘only a small samplesize at level two (meaning a sample of 50 or less)leads to biased estimates’ and McNeish (2014,p. 558) concluded that ‘both methods [multi-levelmodelling and generalized estimating equations]are reasonable for accounting for the clustereddata structure even with sparse data contain-ing very few observations per cluster’. Thus,we applied HLM with robust MLE and log-likelihood difference tests, group-mean centringfor all exploratory variables involved in cross-levelinteractions (i.e. employee CO and performance

rewards), and grand-mean centring for all otherpredictors.6

Results

We obtained similar results with respect toHypothesis 1 as in Study 1, even after control-ling for the effects of firm and employee sellingorientation. The interaction of employee COwith firm CO (γ = −0.54, p < 0.03) in Model2.3 is significant and in line with our predictions.In Model 2.4, we found a positive three-wayinteraction between employee CO, firm CO andperformance-contingent rewards (γ = 1.57, p <

0.001), supporting Hypothesis 2.In Figure 4, we probe this three-way interaction

by plotting the simple slope of employee CO at onestandard deviation above and below the mean offirm CO and the mean of performance-contingentrewards. In the case of low performance-contingent rewards (panel A), there is a positiveeffect of employee CO on employee performancewhen firm CO is low (γ = 1.90, p < 0.001) anda non-significant negative effect when firm CO ishigh (γ = −0.10, p = 0.83; p < 0.001 for the slopedifference test). In contrast, we find no significantdifference in the positive relationship betweenemployee CO and their performance between high(γ = 0.91, p < 0.02) and low (γ = 1.30, p < 0.001)firm CO when performance-contingent rewardsare high (panel B; p = 0.35 for the slope differencetest). In summary, consistent with our hypothesis,the substitution effect between firm CO andemployee CO on performance is not detectedunder a high level of performance-contingentrewards.

Robustness tests and supplementary analysis

First, we re-estimated our model using the com-bined sample of all respondents, including the 216additional employees from 216 different firms. Weused simple regression analysis and included thesame controls as in the main analysis. The re-sults confirm the findings from the main anal-yses (see Appendix S3). We found a negativeinteraction of employee CO with firm CO on em-ployee performance (b = −0.12, p < 0.007) and

6We replicated our analyses with simple regression, gen-eralized estimating equations and a grand-mean centringstrategy: all results remained stable.



Panel A: Low Performance-Contingent Rewards

Panel B: High Performance-Contingent Rewards

Firm COlow

Firm CO high

3.50

4.00

4.50

5.00

5.50

6.00

6.50


Em

ploy

ee P

erfo

rman

ce

Firm CO low

Firm CO high

3.50

4.00

4.50

5.00

5.50

6.00

6.50


Em

ploy

ee P

erfo

rman

ce

Figure 4. The contingency role of performance-related rewards in Study 2

Notes: CO = customer orientation. The dotted line represents a non-significant effect in Figure 4 panel A

a positive three-way interaction between employeeCO, firmCO and performance-contingent rewardson employee performance (b = 1.48, p < 0.001).Second, we replicated our analyses with an ad-justed measure of employee performance relativeto colleagues from the same firm (i.e. employeeperformance = individual performance−mean in-dividual performance within the firm) and foundthe same effects as in the main analysis (allhypotheses supported at p < 0.01). Third, wetested whether firm CO affects the performance-contingent rewards of employees and found nosignificant effect (b = −0.04, p = 0.12); thus,performance-contingent rewards appear to be anindependent compensation device that firms use ir-respective of their CO level. We further replicatedour analyses using a parsimonious structural equa-tion model. The main effects model showed good

fit (χ2 (159) = 211.12, CFI = 0.95, RMSEA =0.05) and employee CO fully mediates the effect offirm CO on employee performance (γ = 0.10, p <

0.02, 95%CI= 0.02; 0.19). Adding the interactionssignificantly improved model fit (−2LL change =22.86, p < 0.001): The interaction between em-ployee CO and firmCO is negatively related to em-ployee performance (γ = −1.42, p< 0.01), and thethree-way interaction between employee CO, firmCO, and performance-contingent rewards is posi-tively related to employee performance (γ = 3.03,p < 0.03). When performance-contingent rewardsare low, the indirect effect of firm CO on employeeperformance is positive and significant only if firmCO is low (γ = 0.19, p < 0.02, 95% CI = 0.04;0.34), but not when firm CO is high (γ = −0.05,p = 0.48, 95% CI = −0.16; 0.07). A Wald Testof parameter equality confirms this observation



(�χ2 = 2.94, df = 1, p < 0.05). In contrast, wefound no significant difference in the indirect pos-itive relationship between firm CO and employeeperformance between high firm CO (γ = 0.13, p< 0.07, 95% CI = −0.01; 0.26) and low firm CO(γ = 0.14, p < 0.02, 95% CI = 0.04; 0.24) whenperformance-contingent rewards are high (WaldTest of parameter equality: �χ2 = 0.03, df = 1,p = 0.86).

Discussion

Study 2 provides additional evidence that thereis a substitution effect between firm CO and em-ployee CO with respect to employee performance,and that the level of firm CO further affects theindirect effect on employee performance. Moreimportantly, this study also identifies how man-agers can mitigate this substitutional effect byusing performance-contingent rewards. Notably,we replicated our findings from the main analysiswith a validation sample.

General discussion

In this paper, we identify and explain a potentialtension that needs to be managed between a firm’semphasis on CO and employees’ perception of thevalue of such behaviour. This is the first study toinclude both cross-level direct effects from firmCO to employee CO and cross-level interactioneffects between firm CO and employee CO onemployee performance. The simultaneous analysisof these two types of cross-level effects is impor-tant, as it brings to the surface a substitutioneffect. Based on SDT, and using the distinctionbetween autonomous and controlled motivation,we propose that the link between employee COand employee performance will be stronger infirms with lower levels of CO. Furthermore, weexamined a boundary condition for this hypothe-sis and posited that when performance-contingentrewards are introduced, the substitution effectdescribed above is weakened.

Both Study 1 and Study 2 indicate a positivecross-level effect of firm CO on employee COand a negative cross-level moderating effect offirm CO on the positive relationship betweenemployee CO and employee performance. InStudy 2, we further found a positive three-wayinteraction between firm CO, employee CO and

performance-contingent rewards on employeeperformance. We were able to replicate the full setof results with a validation sample. Taken together,our findings are robust across different types ofemployees (back office vs. customer-contactemployees), measurements of key variables (topmanagement team vs. organizational CO andmeasurement of performance) and data sources(key informants vs. multiple informants).

Theoretical implications

We contribute to the CO implementation liter-ature in three important ways. First, scholarsagree that employees have two main motivationsfor adopting CO: the need to comply with thenormative mandate of the firm’s CO (Gebhardt,Carpenter and Sherry, 2006) and the expectationof superior individual job performance (Zablahet al., 2012). While the former can relate to bothautonomous and controlled motivation, the latteris an inherently autonomous motivation, becauseemployees rely on their own judgment in terms ofwhether or not to adopt a CO (Gagne and Deci,2005). Our work reveals an interesting interplaybetween the emphasis a firm places on CO and theextent to which CO is an individual success factor.Consequently, we propose an extended view ofthe process through which managers influencethe adoption of a CO by employees. In doingso, we integrate the autonomous and controlledmotivations in the CO context. This is also impor-tant to qualify the indirect relationship betweenfirm CO and employee performance via employeeCO suggested by previous research (Boles et al.,2001; Cross et al., 2007). We formally test thisindirect relationship for the first time and findthat the indirect effect of firm CO on employeeperformance appears to be conditional on thelevel of firm CO. In summary, our model andfindings suggest that neglecting to consider thetwo different motivations simultaneously may ex-plain the frequent failures of CO initiatives withinfirms.Second, with regard to the moderating role of

firm CO in the relationship between employeeCO and employee performance, our study con-tributes to the ongoing debate concerning theextent to which employees benefit from their CO.Indeed, both Franke and Park (2006) and Zablahet al. (2012) observed significant variance in themeta-analytic correlations between employee CO



and performance, and the moderator analyses intheir work provided mixed results. Our findingssuggest that the CO in the broader organizationalcontext determines the performance effects ofan employee’s CO. This potential moderatorwas not examined by previous studies and thusrepresents a novel finding and explanation of theheterogeneity of the employee CO–performancerelationship, given that our study takes into ac-count additional control variables and moderatorsreported by previous research. In firms with lowCO, employees rely on their personal interestsand enjoyment to direct their customer-orientedbehaviour, and thus high employee CO will beless frequent but more authentic compared withfirms with high CO. Thus, employees with highCO are more likely to outperform other employ-ees within their firm. In contrast, in firms withhigh CO, the performance effects of employ-ees’ CO will be diluted because CO initiativesinstil at least some controlled motivation foremployees, making employee CO – other thingsbeing equal – more frequent, but less likely to beinternalized.

Third, our results point to a different andnovel interpretation of the role and importance ofperformance-contingent rewards for CO. Indeed,such rewards help balance the negative effectof the normative pressure to comply with theorganizational mandate, rather than working as adirect motivator to take on CO behaviours. Thiseffect is due to a stronger perception of autonomyand competence as being related to CO, whichin turn drives the adoption of the behaviour inquestion by individual employees. Hence, animportant theoretical implication of our resultsis that performance-contingent rewards enable afairer redistribution of the value that employeeshelp to create. Indeed, marketing scholars proposevalue creation through relational and collaborativeexchanges between the firm, its representativesand its customers (Vargo and Lusch, 2008),while calling for a balanced consideration of theroles and rewards among this network of actors(Gummesson, 2008). We further find that, whenperformance-contingent rewards are low, the indi-rect effect of firm CO on employee performance ispositive and significant only if firm CO is low, butnot when it is high, leading to an undesired situ-ation for firms. In contrast, we find no significantdifference in the indirect positive relationship be-tween firmCOand employee performance for high

and low firm CO when performance-contingentrewards are high, further supporting theimportance of performance-contingent rewardsin aligning the benefits of individual and firmCO.

Managerial implications

Our findings have direct implications for theimplementation of customer-oriented initiativeswithin firms. Specifically, we shed light on how or-ganizational leaders can influence the CO processby acting jointly on the top-down diffusion of COand complementary aspects related to the workenvironment and performance-related pay. A firstsuggestion would be to include specific referencesto the benefits of CO for individual performancein various strategic initiatives (i.e. training, workprocedures, internal communications) to empha-size the importance of individuals adopting CO.In companies that strongly encourage their em-ployees to be customer-oriented, this may counter-balance the tendency towards low internalizationof the behaviour. A second recommendation is tomonitor andmeasure the perceived effectiveness ofCO as part of the strategy implementation process,to detect the potential tension highlighted by ourstudy. For example, using performance appraisalsor staff surveys, linemanagers can gauge the extentto which their employees perceive CO as a key per-formance factor. Finally, we advise managers toimplement appropriate performance-contingentrewards in conjunction with organizational initia-tives that will promote or re-launch the adoptionof customer-oriented behaviours among employ-ees, with specific reference to the sales force. Also,our findings suggest that, rather than ‘pushing’employees to become more customer-oriented,performance-contingent rewards should ‘pull’employees in that direction by helping themto associate CO with individual performance.Thus, a further recommendation pertains to thecommunication of performance-related rewards.For example, rewards could be directly associatedwith relevant customer metrics, which in turn maybe portrayed as naturally linked to the adoptionof customer-oriented behaviour by individual em-ployees. The ultimate aim here is to manage the or-ganizational culture, environment and rewards tomaximize the internalization of CO by individualemployees.



Limitations

The empirical results across the two studiesshould be interpreted bearing their limitations inmind. First, we were not able to measure explic-itly the proposed mechanism that transmits themoderating effect of firm CO on the relationshipbetween employee CO and employee perfor-mance (controlled and autonomous motivation).Although the proposed mechanism is in linewith SDT and the CO literature, future researchshould validate the proposed process by mea-suring the different types of motivation. Second,the cross-sectional nature of the data does notallow us to infer causality. Further research usinglongitudinal data or an experimental design couldaddress this issue. Third, because no objectivemeasures of performance were available, we reliedon employees’ self-reported performance. Al-though empirical evidence shows that subjectivemeasures may often ‘do a better job of tappingthe content domain of the performance construct’(Rich et al., 1999, p. 52) than objective measuresdo, future studies may seek to replicate our resultswith objective measures of performance. Fourth,the comparability of the studies is somewhat lim-ited: the back-office employees in Study 1 receivedno substantial performance-linked incentives,Study 2 used different measures from those inStudy 1, and we were only able to test for the mod-erating role of performance-contingent rewardswith a sample of customer-contact employees.Examining whether this relationship holds forback-office employees could be worthwhile, be-cause these employees may be subject to differentcompensation arrangements. Fifth, while we con-trolled for organizational formalization, we werenot able to include ‘service scripts’ among ourcontrols, because none of the participating firmsuse service scripts for their back-office employeesand sales employees. Thus, future research shouldvalidate our model with frontline service em-ployees and explicitly consider the role of servicescripts. Finally, the substitution effects of firm COmay further depend on how organizations com-municate CO to their employees and other factors,such as the ability of customers to detect surfaceacting, may affect the relationships proposedand tested in our model.7 Thus, investigating

7We thank an anonymous reviewer for pointing these lim-itations and future research directions out to us.

whether firms may use certain communicationtactics to anticipate the substitution effect andconsidering how customer characteristics mayaffect the interplay between employee and firmCO are promising research directions.

Future research directions

In addition to the limitations mentioned above,our study points to interesting directions for futureresearch. While we focus on CO as a prominentstrategic orientation, future investigations couldexplore the cross-level effects examined by takinginto account different dimensions of organiza-tional culture and strategic orientation that spanfirms and individuals in terms of behaviours andperformance implications (e.g. entrepreneurshipor learning orientation). Second, our researchcontext was homogeneous in terms of culturaltraits (Hofstede, 1985). Given Hohenberg andHomburg’s (2016) findings that various finan-cial and non-financial steering instruments aredifferentially effective in motivating employeesacross cultures, future studies could replicate ouranalyses in countries with varying levels of individ-ualism, power distance or uncertainty avoidanceto produce interesting cross-cultural compar-isons. Finally, while we reveal the importance ofperformance-contingent rewards, future researchcould examine the ability of additional elementsof the work environment and job characteristicsto promote autonomous motivation.

References

Allen, J. A., S. D. Pugh, A. A. Grandey and M. Groth (2010).‘Following display rules in good or bad faith? Customer ori-entation as a moderator of the display rule–emotional laborrelationship’, Human Performance, 23, pp. 101–115.

Amabile, T. M. (1993). ‘Motivational synergy: toward new con-ceptualizations of intrinsic and extrinsic motivation in theworkplace’,Human Resource Management Review, 3, pp. 185–201.

Amabile, T. M., K. G. Hill, B. A. Hennessey and E. M. Tighe(1994). ‘The work preference inventory: assessing intrinsic andextrinsic motivational orientations’, Journal of Personality andSocial Psychology, 66, pp. 950–967.

Boles, J. S., B. J. Babin, T. G. Brashear and C. Brooks (2001).‘An examination of the relationships between retail work en-vironments, salesperson selling orientation–customer orienta-tion and job performance’, Journal of Marketing Theory andPractice, 9, pp. 1–13.

Brach, S., G. Walsh, T. Hennig-Thurau andM. Groth (2015). ‘Adyadic model of customer orientation: mediation and moder-ation effects’, British Journal of Management, 26, pp. 292–309.



Cerasoli, C. P., J. M. Nicklin and M. T. Ford (2014). ‘Intrin-sic motivation and extrinsic incentives jointly predict perfor-mance: a 40-year meta-analysis’, Psychological Bulletin, 140,pp. 980–1008.

CMO Council (2008). ‘Technology marketers challenged toreorganize around customers’. Available at http://www.cmocouncil.org/press-detail.php?id=103 [accessed 2 August2015].

Cross, M. E., T. G. Brashear, E. E. Rigdon and D. N. Bellenger(2007). ‘Customer orientation and salesperson performance’,European Journal of Marketing, 41, pp. 821–835.

Deci, E. L., R. Koestner and R. M. Ryan, (1999). ‘A meta-analytic review of experiments examining the effects of ex-trinsic rewards on intrinsic motivation’,Psychological Bulletin,125, pp. 627–668.

Deshpande, R., J. U. Farley and F. E. Webster Jr (1993). ‘Cor-porate culture, customer orientation, and innovativeness inJapanese firms: a quadrad analysis’, Journal of Marketing, 57,pp. 23–37.

Donavan, T. D., T. J. Brown and J. C. Mowen (2004). ‘Internalbenefits of service-worker customer orientation: job satisfac-tion, commitment, and organizational citizenship behaviours’,Journal of Marketing, 68, pp. 128–146.

Dwyer, D. J. and D. C. Ganster (1991). ‘The effects of jobdemands and control on employee attendance and satis-faction’, Journal of Organizational Behavior, 12, pp. 595–608.

Enders, C. K. and D. Tofighi (2007), ‘Centering predictor vari-ables in cross-sectional multilevel models: a new look at an oldissue’, Psychological Methods, 12, pp. 121–138.

Fong, C. T. and L. Z. Tiedens (2002). ‘Dueling experiences anddual ambivalences: emotional and motivational ambivalenceof women in high status positions’, Motivation and Emotion,26, pp. 105–121.

Fong, K. H. and E. Snape (2015). ‘Empowering leadership, psy-chological empowerment and employee outcomes: testing amulti-level mediating model’, British Journal of Management,26, pp. 126–138.

Franke, G. R. and J. E. Park (2006). ‘Salesperson adaptive sellingbehaviour and customer orientation: a meta-analysis’, Journalof Marketing Research, 43, pp. 693–702.

Gagne, M. and E. L. Deci (2005). ‘Self-determination theoryand work motivation’, Journal of Organizational Behavior, 26,pp. 331–362.

Gebhardt, G. F., G. S. Carpenter and J. F. Sherry Jr (2006).‘Creating a market orientation: a longitudinal, multifirm,grounded analysis of cultural transformation’, Journal ofMar-keting, 70, pp. 37–55.

Gerhart, B. and M. Fang (2015). ‘Pay, intrinsic motiva-tion, extrinsic motivation, performance, and creativity in theworkplace: revisiting long-held beliefs’, Annual Review ofOrganizational Psychology and Organizational Behavior, 2,pp. 489–521.

Grant, A. M. (2008). ‘Does intrinsic motivation fuel the proso-cial fire? Motivational synergy in predicting persistence, per-formance, and productivity’, Journal of Applied Psychology,93, pp. 48–58.

Grant, A. M., S. Nurmohamed, S. J. Ashford and K. Dekas(2011). ‘The performance implications of ambivalent initia-tive: the interplay of autonomous and controlled motivations’,Organizational Behavior and Human Decision Processes, 116,pp. 241–251.

Guenzi, P., L. M. De Luca and G. Troilo (2011). ‘. ‘Organiza-tional drivers of salespeople’s customer orientation and sellingorientation’, Journal of Personal Selling & Sales Management,31, pp. 269–285.

Gummesson, E. (2004). ‘Return on relationships (ROR): thevalue of relationship marketing and CRM in business-to-business contexts’, Journal of Business & Industrial Marketing,19, pp. 136–148.

Gummesson, E. (2008). ‘Extending the service-dominant logic:from customer centricity to balanced centricity’, Journal of theAcademy of Marketing Science, 36, pp. 15–17.

Harris, L. C. and E. Ogbonna (2000). ‘The responses of front-line employees to market-oriented culture change’, EuropeanJournal of Marketing, 34, pp. 318–340.

Hennig-Thurau, T., M. Groth, M. Paul and D. D. Gremler(2006). ‘Are all smiles created equal? How employee–customeremotional contagion and emotional labor affect service rela-tionships’, Journal of Marketing, 70, pp. 58–73.

Hofstede, G. (1985). ‘The interaction between national and orga-nizational value systems’, Journal of Management Studies, 22,pp. 347–357.

Hohenberg, S. andC.Homburg (2016). ‘Motivating sales reps forinnovation selling in different cultures’, Journal of Marketing,80, pp. 101–120.

Homburg, C., M. Muller and M. Klarmann (2011). ‘Whenshould the customer really be king? On the optimum level ofsalesperson customer orientation in sales encounters’, Journalof Marketing, 75, pp. 55–74.

Jansen, J. J., F. A. Van Den Bosch and H. W. Volberda (2006).‘Exploratory innovation, exploitative innovation, and perfor-mance: effects of organizational antecedents and environmen-tal moderators’,Management Science, 52, pp. 1661–1674.

John, G. and B. Weitz (1989). ‘Salesforce compensation: an em-pirical investigation of factors related to use of salary versusincentive compensation’, Journal of Marketing Research, 26,pp. 1–14.

Kennedy,K.N., F.G. Lassk and J. R.Goolsby (2002). ‘Customermind-set of employees throughout the organization’, Journalof the Academy of Marketing Science, 30, pp. 159–171.

Kozlowski, S. and K. J. Klein (2000). ‘A multilevel approachto theory and research in organizations: contextual, tempo-ral, and emergent processes’. In K. J. Klein and S. Kozlowski(eds), Multilevel Theory, Research, and Methods in Organiza-tions: Foundations, Extensions, and New Directions, pp. 3–90.San Francisco, CA: Jossey-Bass.

Liao, H. and A. Chuang (2004). ‘A multilevel investigationof factors influencing employee service performance andcustomer outcomes’, Academy of Management Journal, 47,pp. 41–58.

Liao, H. and M. Subramony (2008). ‘Employee customer orien-tation in manufacturing organizations: joint influences of cus-tomer proximity and the senior leadership team’, Journal ofApplied Psychology, 93, pp. 317–328.

Lichtenthal, J. D. and D. T. Wilson (1992). ‘Becoming marketoriented’, Journal of Business Research, 24, pp. 191–207.

Lin, C.H.V.,K. Sanders, J.M. J. Sun,H. Shipton andE.A.Mooi(2016). ‘From customer-oriented strategy to organizational fi-nancial performance: the role of human resource managementand customer-linking capability’, British Journal of Manage-ment, 27, pp. 21–37.

Maas, C. J. and J. J. Hox (2005). ‘Sufficient sample sizes for mul-tilevel modeling’,Methodology, 1, pp. 86–92.


http://www.cmocouncil.org/press-detail.php?id=103

http://www.cmocouncil.org/press-detail.php?id=103


MacKenzie, S. B., P.M. Podsakoff andG. A. Rich (2001). ‘Trans-formational and transactional leadership and salesperson per-formance’, Journal of the Academy of Marketing Science, 29,pp. 115–134.

Marshall, G. W., W. C. Moncrief, and F. G. Lassk (1999). ‘Thecurrent state of sales force activities’, Industrial MarketingManagement, 28, pp. 87–98.

McNeish, D. M. (2014). ‘Modeling sparsely clustered data:design-based,model-based, and single-level methods’,Psycho-logical Methods, 19, pp. 552–563.

Menguc, B., S. Auh, C. S. Katsikeas and Y. S. Jung (2016).‘When does (mis)fit in customer orientation matter for front-line employees’ job satisfaction and performance?’, Journal ofMarketing, 80, pp. 65–83.

Moncrief, W. C. and G. W. Marshall (2005). ‘The evolution ofthe seven steps of selling’, Industrial Marketing Management,34, pp. 13–22.

Narver, J. C. and S. F. Slater (1990). ‘The effect of a market ori-entation on business profitability’, Journal of Marketing, 54,pp. 20–35.

Plouffe, C. R., W. Bolander, J. A. Cote and B. Hochstein (2016).‘Does the customer matter most? Exploring strategic frontlineemployees’ influence of customers, the internal business team,and external business partners’, Journal of Marketing, 80, pp.106–123.

Podsakoff, P. M., S. B. MacKenzie, J.-Y. Lee and N. P. Podsakoff(2003). ‘Common method biases in behavioural research: acritical review of the literature and recommended remedies’,Journal of Applied Psychology, 88, pp. 879–903.

Procter, S., L. McArdle, J. Hassard and M. Rowlinson (1993).‘Performance related pay in practice: a critical perspective’,British Journal of Management, 4, pp. 153–160.

Raudenbush, S. W. and A. S. Bryk (2002). Hierarchical LinearModels: Applications and Data Analysis Methods. London:Sage Publications.

Rich, G. A., W. H. Bommer, S. B. MacKenzie, P. Podsakoff andJ. L. Johnson (1999). ‘Apples and apples or apples and or-anges? Ameta-analysis of objective and subjective measures ofsalesperson performance’, Journal of Personal Selling & SalesManagement, 29, pp. 41–52.

Rich, B. L., J. A. Lepine, and E. R. Crawford (2010). ‘Job engage-ment: antecedents and effects on job performance’, Academyof Management Journal, 53, pp. 617–635.

Ryan, R. M. and E. L. Deci (2000). ‘Self-determination the-ory and the facilitation of intrinsic motivation, social develop-ment, and well-being’, American Psychologist, 55, pp. 68–78.

Ryan, R. M., V. Mims and R. Koestner (1983). ‘Relation of re-ward contingency and interpersonal context to intrinsic mo-tivation: a review and test using cognitive evaluation theory,’Journal of Personality and Social Psychology, 45, pp. 736–750.

Schmitz, C. and S. Ganesan (2014). ‘Managing customer andorganizational complexity in sales organizations’, Journal ofMarketing, 78, pp. 59–77.

Snijders, T.A. B. andR. J. Bosker (1999).An Introduction toBasicand Advanced Multilevel Modelling. London: Sage.

Stock, R. M. and W. D. Hoyer (2005). ‘An attitude–behaviourmodel of salespeople’s customer orientation’, Journal of theAcademy of Marketing Science, 33, pp. 536–552.

Thomas,R.W.,G.N. Soutar andM.M.Ryan (2001). ‘The sellingorientation–customer orientation (S.O.C.O.) scale: a proposedshort form’, Journal of Personal Selling & Sales Management,21, pp. 63–70.

van der Borgh, M., A. de Jong and E. J. Nijssen (2015). ‘Alter-native mechanisms guiding salespersons’ ambidextrous prod-uct selling’, British Journal of Management, https://doi.org/10.1111/1467-8551.12148.

Vargo, S. L. and R. F. Lusch (2008). ‘Service-dominant logic:continuing the evolution’, Journal of the Academy of Market-ing Science, 36, pp. 1–10.

Wieseke, J.,M. Ahearne, S. K. Lam andR. vanDick (2009). ‘Therole of leaders in internal marketing: a multilevel examinationthrough the lens of social identity theory’, Journal of Market-ing, 73, pp. 123–145.

Williams, M. R. and J. S. Attaway (1996). ‘Exploring salesper-sons’ customer orientation as a mediator of organizationalculture’s influence on buyer–seller relationships’, Journal ofPersonal Selling & Sales Management, 16, pp. 33–52.

Yoo, J. J. and T. J. Arnold (2016). ‘Frontline employee customer-oriented attitude in the presence of job demands and resourcesthe influence upon deep and surface acting’, Journal of ServiceResearch, 19, pp. 102–117.

Zablah, A. R., G. R. Franke, T. J. Brown andD. E. Bartholomew(2012). ‘How and when does customer orientation influencefrontline employee job outcomes?Ameta-analytic evaluation’,Journal of Marketing, 76, pp. 21–40.

Dennis Herhausen (PhD, University of St. Gallen) is Assistant Professor of Marketing at the Instituteof Marketing, University of St. Gallen. His research focuses on marketing strategy implementation,customer relationships, digital marketing, and channel management. His work has been published inthe Journal of Retailing, Journal of Business Research, Journal of Managerial Psychology, ManagementDecision and the Academy of Management Best Paper Proceedings, among others.

Luigi M. De Luca (PhD, Bocconi University) is Professor of Marketing and Innovation at CardiffBusiness School, Cardiff University. His research revolves around the themes of Innovation, Market-ing Strategy, Knowledge and Organizational Learning, Big Data and Decision-Making. His work hasbeen published in the Journal of Marketing, Journal of Product Innovation Management, Research Pol-icy, Industrial Marketing Management and Journal of Personal Selling and Sales Management, amongothers.


https://doi.org/10.1111/1467-8551.12148

https://doi.org/10.1111/1467-8551.12148


Michael Weibel (PhD, University of St. Gallen) is a post-doctoral research fellow at the Institute ofMarketing,University of St. Gallen.He is also amanagement trainer as well as founder andCEOof theCentre for Industrial Marketing St. Gallen AG, a consulting firmwhich covers all strategically relevanttopics contribute to the customer’s success. Michael Weibel’s research focuses on business-to-businessmarketing and sales management.

Supporting Information

Additional Supporting Information may be found in the online version of this article at the publisher’swebsite:

Appendix S1. Measurement of constructs in Study 1Appendix S2. Measurement of constructs in Study 2Appendix S3. Simple regression results in the full sample of Study 2


theinterplaybetweenemployeeandfirm … 2017... · 2017-05-12 · contribution1:identifying...

Documents