Top Management Political Skill, Market Orientation and...
Transcript of Top Management Political Skill, Market Orientation and...
Top Management Political Skills, Market Orientation and Business Value 1
Top Management Political Skill, Market Orientation and Business Value in an
Emerging Economy: Evidence from Pakistan
Muhammad Jehangir,
Abdul Wali Khan University, Pakistan
Postdoctoral Fellow University of Kentucky, USA
Joe Labianca
University of Kentucky, USA
Zahoor ul Haq
Abdul Wali Khan University, Pakistan
Top Management Political Skills, Market Orientation and Business Value 2
Abstract
This study investigates the role of top management political skills in business opportunity
recognition and business value creation. Top management teams are vital to a firm’s value
creation for many reasons including, their involvement in key projects, their role in decision-
making, their responsibility to meet customer needs, and their role in evaluating competitors.
Therefore, a strong commitment from top-level management towards market orientation plays a
key role in the creation of firm value. Data from 187 top-level managers show that the political
skill of top-level management contributes to higher level of market orientation that therefore
increases firm value. The better use of social astuteness, networking ability and interpersonal
skills of top-level management for business strategy development may help organizations to gain
competitive advantage in market turbulent environment.
Top Management Political Skills, Market Orientation and Business Value 3
Introduction
For many years business practitioners, scholars and researchers alike have considered the
importance of politics within an organization. All business endeavors require political
maneuvers to run the organization. Strategies and policies having political blended behaviors are
more likely to be successful (Ferris et al 2005). Political skill is the combination of social
understanding, and the ability to adjust ones’ behavior with the demands of the situation, which
in turn, motivates trust and confidence from business associates (Ferris et al 2005; 2007). One’s
political skills predict effective job performance with the comparison of social effectiveness like
networking ability (Semadar, Robins, & Ferris, 2006), political skill abilities also influence a
person’s general mental abilities and personal characteristics (Liu, et al, 2007). Political skill has
a great impact on employment opportunities, income potential, bottom-up positioning and career
satisfaction (Ferris, et al, 2009).
The involvement of senior managers in developing strategic orientation influences better
business outcomes (Jaworski and Kohli, 1993). Prior research suggests the valuable role of top
management for innovation and business performance (Yu-hui, 2008; and Teo, et al., 2009).
Top management can utilize and deploy resources that positively affect business functions and
help to remove the obstacles that may hinder a project’s success. Consequently, an increased
amount of top management ties are assumed to be linked to enhanced project performance.
Management support is directly related to the development of higher quality policies and
practices for the successful implementation of various strategic orientations. The primary
structure of skills in the organizations is based on the prior work experience of management and
employees. In current study, managerial political skill in the development of market oriented
strategies has been observed to explore the contribution of social networks in creating firm value.
Top Management Political Skills, Market Orientation and Business Value 4
Political Skill
Political skills are a theme that have been present in businesses and organizations for
many years, and have had a tremendous impact on the successes and failures of those businesses
and organizations. Ferris et al, (1999) developed the concept of political skills and established
its constructs for judging the multidimensional managerial and organizational implications.
They later renamed the term Political Skill Inventory (PSI). Pfeffer (1981) explained the
political perspective within an organization and urged that political skill is important for the
success of the organization. He suggested the term be used for research to develop a good
understanding of the construct. Mintzberg (1983), stated, “political skill as the exercise of
influence through persuasion, manipulation and negotiation.”
Since the 1970’s an interest in organizational politics has rapidly grown with the
complexity and ambiguity of the dynamism of working environments within organizations, thus
it tends to adopt the political skills and new approaches to solve the dynamic problems faced
within business activities (Cascio 1995).
Advances in technology, a prevalence of industries focused on product improvement,
specialization, information sharing, and customer service, have often made traditional systems of
business obsolete. Old-fashioned, mechanistic organizations, limited in their ability to cope with
turbulent business conditions, are adapting more organic structures that place emphasis on the
use of human and intellectual capital to meet organizational goals. These organizations have
flatter hierarchies, are less formal, and are more flexible in addressing complex work problems
with seemingly uncertain resolutions (Daft, 2004).
To cope with changes in organizational environments and structures, organizational
politics have become recognized as an important and necessary channel through which power is
Top Management Political Skills, Market Orientation and Business Value 5
distributed, decisions are made, and work goals are realized (Pfeffer 1981; 1992). Echoing the
words of Pfeffer, we feel that in many cases organizational politics are the best and only way to
resolve work conflicts and make organizational decisions.
Salancik & Pfeffer’s (1977) interpretation of the strategic-contingency model of power
helped fuel the rising interest in how politics affect workers and organizations. These authors
have suggested that the distribution of organizational power is contingent upon the problems
most consequential to the organization’s survival. Managers can gain power by obtaining
control of critical work activities and exploiting ways of completing these activities through the
use of social capital (i.e. other people). In response to this theory, concerns have been raised
over the misuse or abuse of power within organizations and the use of manipulative AND
deceptive political behaviors to gain power. Wary of exploitation, researchers warned against
the dark side of political behavior (Ferris & King, 1991).
Therefore, political behavior began to take on a negative connotation, and was
discouraged by many organizations and HR administrators. Only recently have theorists
considered political behaviors to be motivated by desires for improved outcomes for the self
and/or for the organization (Ferris, Perrewe, Anthony, & Gilmore, 2000).
Academics and practitioners are beginning to frame politics in a more positive light. A
building block for this shift was laid nearly 50 years ago with Thompson and Tuden’s (1959)
quadratic-categorization of decision situations. These authors proposed that the way decisions
are made is contingent upon the agreement over organizational goals and how these goals should
be realized. According to their model, with exception to situations where there is full agreement
over what to do and how to do it, attempts to influence or the use politics will always emerge
when decisions are being made.
Top Management Political Skills, Market Orientation and Business Value 6
Pfeffer (1981) expanded on the work of Thompson and Tuden with his theoretical
modeling of the conditions producing the use of power and politics in organizations. Pfeffer’s
model contends that the use of politics in organizations is the response to conflicts over
important decisions when there is a dispersion of power across decision makers. He argues that
conflict will arise when resources are scarce, organizational units are interdependent, or there are
discrepancies in work goals across units or departments.
In such situations, managers need to use politics to lobby for access to resources or for
decision-making power. Pfeffer asserts that when the conditions of his model are met, “the use
of power is virtually inevitable and furthermore, it is the only way to arrive at a decision” (pg.
70). Consequently, those managers with the will, and the skill, to use politics are most likely to
achieve their personal and/or organizational goals.
To add to this, Ferris and his colleagues (1999) have initiated research treating the
appropriate use of political behaviors as a skill-set indicative of good performance and
successful outcomes, rather than as actions detrimental to organizational functioning.
Acknowledgement of political behavior as a skill-set, and a viable business tool, has
opened many doors for HR interventions that were not explored while politics remained
stigmatized as an organizational ailment. By identifying and encouraging desired political
behaviors, HR administrators can use the assessment of political skill for purposes of
recruitment, selection, training, and managerial development.
The Political Skill Inventory (PSI) was developed to target four key dimensions of
desired political behaviors: social astuteness, interpersonal influence, networking ability, and
apparent sincerity (Ferris et al., 2005). These elements of political skill are similar to the
characteristics of social intelligence. Researchers studying the applications of social intelligence
Top Management Political Skills, Market Orientation and Business Value 7
argue that effective leaders need to exercise social perceptiveness and behavioral flexibility when
dealing with social interactions in the workplace (Zaccaro, Gilbert, Thor, & Mumford, 1991). In
other words, good managers need to be able to discriminate between social contexts and know
how to monitor behavior depending on the demands of a specific context.
Pfeffer (1992) claims that successful managers strategically position themselves within
the communication network, develop powerful allies, and build rapport with those who have
access to resources. All of these behaviors are focused on the maintenance of networks.
Politically skilled individuals exercise what Culbert (1996) refers to as a mind-set
orientation in determining how to interact with those they wish to influence.
Politically skilled managers also build lasting relationships with stakeholders and
influence potential clients with diverse interests by analyzing political arenas, choosing strategies
aligned with audience expectations and styles, and by demonstrating behavioral flexibility and
genuineness in the execution of these strategies.
Market Orientation
Pelham and Wilson (1996) argued that, the ability of a firm, to outperform less market-
oriented competitors is based on its ability to develop long term superior customer value. A firm
with better market orientation develops a positive reception for understanding the potential
customer and market requirements. Technological advancement enables the firms to interact
with customers in a more advanced and efficient way. It has been noted that customer
relationship management enables the firms to deal with the customers more effectively and
efficiently (S. H. Chien et al., 2008). Further, he found that relational information processes are
positively influenced by customer retention and satisfaction.
Top Management Political Skills, Market Orientation and Business Value 8
Empirical efforts have been taken for the consequences of market orientation as well,
while the majority of research is devoted to the relationship of market orientation and business
performance (Diamantopoulos and Hart, 1993; Pitt et al., 1996; Ruekert, 1992; Slater and
Narver, 1994). Most of the researchers directly linked market orientation to business
performance. However, Webster (1988) argued that market orientation cannot influence business
performance directly, and that there should be some mediating variables or strategic decisions.
Market orientation, which reflects the organization’s commitment and the continuing
assortment of information, will amplify the influence (Chien et al., 2008).
Conceptual Model and Hypothesis Development
This conceptual model demonstrates the specific linkages, and the causal directions of the
constructs investigated in the study. Drawing from the specifics of the conceptual model,
hypotheses can be formulated and tested through several suitable statistical analytical techniques
to determine the validity of the theory as postulated by the researchers (Sekaran, 2000).
Theoretical Framework
Conceptual Model
Political Skill
social astuteness
interpersonal
influence
networking
ability
Market Orientation
Customer Orientation
Competitor Orientation
Inter-functional Coordination
Business Value
Financial Performance
Non-financial Performance
Top Management Political Skills, Market Orientation and Business Value 9
Hypothesis
H1: Top management political skill contributes to higher level of market orientation.
H2: Top management political skill and market orientation are positively related to business
value.
Method
In this study, a simple random sampling technique is used to gather the samples
necessary for quantitative examination (Lee and Lings, 2008). Firms are randomly selected from
the population of companies available in the local Chamber of Commerce directory. The
advantage of using this directory was the availability of the industry type, URL, E-mail address,
company address, contact numbers and geographical locations. The population was approached
through personally administered questionnaires and postal surveys, in which 187 complete
responses were received from a sample size of 373. The total response rate is 51.5%, acceptable
for data analysis (Sekaran, 2003; Gunasekaran and Ngai, 2008).
Discussions
The demographic profile of the respondents is presented in this section to provide an
insight into their composition, gender, occupational background, academic background, as well
as company background as shown in table 1. Additionally, this section will provide a summary
on the basic statistics pertaining to each of the constructs examined in this current study. The
response rate and respondent characteristics included as well as certain features of the companies
in the sample to highlight its characteristics.
Top Management Political Skills, Market Orientation and Business Value 10
Table 1: Demographic Profile
Full Time Employees Frequency Valid%
Gender Male
Female
102
85
56.4
43.6
Education
PhD
Master
Bachelor
Diploma
8
87
43
49
2.8
30.3
49.8
17.1
Position
CEO
Director
General Manager
IT Manager
Business Manager
48
44
33
34
28
23.7
22.3
18.5
18.8
16.7
Table 2: Full Time Employees
Experience Frequency Valid%
Less than 1 year
1-2 years
3-5years
5-10
More than 10
23
54
70
32
8
15
25.8
45.3
11.1
2.8
Reliability of the Constructs
To analyze the reliability of the survey instrument, Cronbach Alpha test has been used.
According to Nunnaly (1978) and Joreskog and Sorbom (1989), the value of .70 is an acceptable
for Alpha reliability. The results show an above-acceptable value of Cronbach Alpha reliability.
The results of the Alpha Reliability are shown in Table 5.
Top Management Political Skills, Market Orientation and Business Value 11
The Cronbach’s alphas for the constructs were computed using the scale reliability
procedure in SPSS and presented in Table 5 below. The reliabilities of most constructs in this
present study fall within an acceptable range (0.701 to 0.878).
The data analysis is carried out using the Statistical Package for Social sciences (SPSS for
Windows version 16.0). The instrument total number of respondents for this research is (No. of
Cases 187). Based on this data, the reliability of the survey instrument has been used to test the
Cronbach’s Alpha. According to Nunnaly (1978) and Jöreskog and Sörbom (1989), .70 is an
acceptable Alpha reliability value. The Alpha reliability less than .70 has been excluded, only the
results of above .70 have been accepted.
The overall Cronbach’s Alpha reliability of this data is 0.932 with 44 items, which shows the
reliable data for analysis
Table 3: Reliability of the constructs
Variables No. of Items Cronbach’s Alpha
Political skill
social astuteness
interpersonal influence
networking ability
4
6
3
0.831
0.875
0.842
Market orientation
Customer Orientation
Competitor Orientation
Interfunctional Coordination
5
6
6
0.865
0.822
0.823
Business Value
Financial Performance
Non-financial Performance
8
6
0.738
0.768
Top Management Political Skills, Market Orientation and Business Value 12
Factor Analysis
After conducting reliability analysis and descriptive statistics, factor analysis was
performed to identify the underlying factors. Factor analysis can be used to determine what
items should be included or excluded in further analysis. To make an effective use of factor
analysis in a study, the criterion, namely, priori conceptual belief about the number of factors to
include in factor analysis, the screening test, and the interpretability of the factor solution should
be considered (Green and Salkind 2003).
Factor analysis is concerned with whether the covariance or correlation among a set of
observed variables can be explained in terms of a smaller number of unobservable constructs
known as common factors (Landau and Everitt, 2004). Factor analysis is one of the most
commonly used techniques for data reduction and structure detection. Moreover, it may also be
used to decide which items on the scale are to be included or excluded from the measure.
In this study, factor analysis (varimax factor rotation) was conducted to identify the
underlying factors affecting EC capability and business performance.
Political Skill Factor Analysis
After conducting reliability analysis to assess the reliability of the scale used to measure the
variables of interest, it is also important to conduct factor analysis. In this case the political skill
variables for each item were analyzed for factor detection. Table shows three variables with 16
items in political skill construct. All items of Social astuteness have achieved the acceptable
loading. However, the item II6 and II4 of Social astuteness factor and NA2 and NA1 of
Networking ability factor have achieved low loading. Thus, these items will not be used in
further analysis.
Top Management Political Skills, Market Orientation and Business Value 13
Table 4: Results of Factor Extraction and Factor Loading
Items Social
astuteness
Social
astuteness
Networking
ability
SA2 .852
SA1 .835
SA3 .803
SA4 .759
II2 .789
II3 .740
II1 .729
II5 .754
II6 .684
II4 .649
NA5 .738
NA6 .720
NA4 .718
NA3 .712
NA2 .681
NA1 .537
Extraction Method: Principal Axis Factoring.
Rotation Method: Varimax with Kaiser Normalization.
Market Orientation - Factor Analysis
Similar with Political Skill, Market Orientation variables in this case for each item on it are
significant to be analyzed for factor detection. There are three variables with 17 items in Market
Orientation construct as mentioned in Table. In the Customer Orientation factor, 1mor4 and
1mor5 have achieved the acceptable loading, yet the remains have achieved the low ones. 2mor2
and 2mor1 of competitor Orientation support factor have achieved low loading and the rest has
Top Management Political Skills, Market Orientation and Business Value 14
achieved an acceptable loading. The third factor, Interfunctional Coordination factor’s items
have achieved an acceptable loading except 3mor1.
Table 5: Results of Factor Extraction and Factor Loading
Items Managerial
Expertise
Top
management
Support
Learning
Capacity
1mor3 .799
1mor4 .736
1mor5 .589
1mor2 .588
1mor1 .551
2mor 4 .809
2mor 3 .785
2mor 5 .737
2mor 6 .716
2mor 2 .618
2mor 1 .600
3mor 6 .854
3mor 3 .851
3mor 5 .833
3mor 2 .810
3mor 4 .760
3mor 1 -------
Extraction Method: Principal Axis Factoring.
Rotation Method: Varimax with Kaiser Normalization.
Top Management Political Skills, Market Orientation and Business Value 15
Business performance Factor Analysis
The factor analysis helps with extracting the inconsistency of items for further analysis.
Business performance possesses two variables, namely financial and non-financial performance
which both is measured by 12 items. In financial performance variable frp5 and fpr4 have
achieved the acceptable loading while all of the non-financial items have achieved the acceptable
loading except nfp3 and nfp1. These two items have been extracted for further analysis.
Table 6: Results of Factor analysis and Factor Loading
Items Financial
Performance
Non-
financial
Performance
fpr4 .715
fpr5 .714
fpr6 .654
fpr2 .644
fpr3 .568
fpr1 ------
nfp4 .816
nfp5 .809
nfp6 .762
nfp2 .752
nfp3 .591
nfp1 -----
Extraction Method: Principal Axis Factoring. Rotation Method: Varimax with Kaiser
Normalization.
Top Management Political Skills, Market Orientation and Business Value 16
Conclusion and Future Directions
By investigating the political skill of top-level management in order to achieve the higher
level of market orientations that ultimately lead to better business performance, this research is
vital for the organizations and managers. Investigating political ties of top-level management
that have an impact on the development of better market orientations includes the contribution to
the business performance. This research also highlights the impact of market orientations that is
influenced by the social networking ties of top-level management on firm performance. It is
essential because given limited resources to the managers; they need to know that strategies and
skills are worth focusing on in order to improve business performance. The findings of this
research may provide a better understanding, and some alternative explanations, of the influence
of social networking on firm performance. It is also helpful in providing the dynamic capability
perspectives of market orientations and social networks in terms of better understanding and
usage of the social capital to achieve a competitive advantage. This research should be taken into
consideration for the successful development of market orientation. This study will prove to be
valuable among enterprises that are dealing with networks, and additionally contribute some
valuable insights into the development of firm value by utilizing political skill of top-level
management.
Top Management Political Skills, Market Orientation and Business Value 17
References
Barney J.B. (1991) “Firm resources and sustained competitive advantage”, Journal of
Management; Vol. 17, pp. 99-120.
Chien, S.H., Wu, J.J., Lai, H.F. (2008) Market orientation and strategies in e-commerce
companies. International Conference on Industrial Informatics. ISSN: 1935-4576, pp. 1232-
1237.
Damanpour, F. (1991). Organisational innovation: A Meta analysis of effects of determinants
and moderators. Academy of Management Journal, Vol. 34, pp. 555-590.
Day, G. S. and Nedungadi, P. (1994). Management representations of competitive advantage.
Journal of Marketing, Vol. 58(April), pp. 31-44.
Ferris, G. R., & Judge, T. A. 1991. Personnel/human resources management: A political
influence perspective. Journal of Management, 17: 447-488.
Ferris, G. R., Perrewé, P. L., & Douglas, C. 2002. Social effectiveness in organizations:
Construct validity and research directions. Journal of Leadership & Organizational Studies, 9:
49-63.
Ferris, G. R. Treadway, D. C., Kolodinsky, R. W., Hochwarter, W. A., Kacmar, C. J., Douglas,
C., & Frink, D. D. 2005. Development and validation of the political skill inventory. Journal of
Management, 31: 126-152
Glaser, R., Chi, M.T.H. R. and Fan, M.J. (1988) The Nature of Expertise, Lawrence Erlbaum
Associates, Hillsdale, NJ.
Jaworski, B. J. & Kohli, A. J. (1993). Market orientation: Antecedents and consequences.
Journal of Marketing, Vol. 57, No. 3, pp. 53-70.
Jayachandran, S., Sharma, S., Kaufman, P. And Raman, P., (2005). The role of relational
information processes and technology use in customer relationship management. Journal of
Marketing, Vol. 69, No. 4, pp. 177-192.
Kawalek, P., Wastell, D. and Newman, M. (2003) “Problematisation and obfuscation in E-
Government,” in Proceedings of the Second International eGovernment Conference, EGOV,
LNCS, 2739, pp. 228-233.
Lee, J., and Slater, J. (2007). Dynamic capabilities, entrepreneurial rent-seeking and the
investment development path: The case of Samsung. Journal of International Management, Vol.
13, No. 3, pp. 241-257.
Miles, R. E & Huberman, A. M. (1994). Qualitative Data Analysis. Thousand Oaks: Sage.
Pelham, A. & Wilson, D. T. (1996). A longitudinal study of the impact of market structure, firm
structure, strategy, and market orientation culture on the dimensions of small firm performance.
Journal of the Academy of Marketing Science, Vol. 24, No. 1, pp. 27-43.
Top Management Political Skills, Market Orientation and Business Value 18
Pfeffer, J. 1992. Managing with power: Politics and influence in organizations. Boston: Harvard
Business School Press.
Reuber, R. (1997) .Management experience and management expertise. Decision Support
Systems, 21, 51-60.
Rhys Andrews.2010, Organizational social capital, structure and performance. Human Relations,
Sage Journal, doi: 10.1177/0018726709342931.
Sekaran, U. (2003). Research methods in business: A skill building approach: John Wiley &
Sons Inc.
Sitkin, S.B., (1996). Learning through failure. In: Cohen, M., Sproull, L. (Eds.), Organizational
Learning. Sage Publications, California.
Semadar, A. 2004. Interpersonal competencies and managerial performance: The role of
emotional intelligence, leadership self-efficacy, self-monitoring, and political skill. Unpublished
doctoral dissertation, Department of Psychology, University of Melbourne, Melbourne,
Australia.
Semadar, A., Robins, G., & Ferris, G. R. 2006. Comparing the effects of multiple social
effectiveness constructs in the prediction of managerial performance. Journal of Organizational
Behavior, 27: 443-461.
Slater, S. F. & Narver, J. C. (1994a). Does competitive environment moderate the market
orientation - performance relationship? Journal of Marketing, Vol. 58, No. 1, pp. 46-55.
Teece, D.J., Pisano, G., Shuen, A., 1997. Dynamic capabilities and strategic management.
Strategic Management Journal Vol. 18, No. 7, pp. 509–533.
Teo, T.S.H and C. Ranganathan. (2004) Adopters and non-adopters of business-to-business
electronic commerce in Singapore, Information & Management Vol. 42, pp. 89–102.
Yu-hui, L. (2008), “An Empirical Investigation on the Determinants of E-procurement Adoption
in Chinese Manufacturing Enterprises”, International Conference on Management Science &
Engineering (15th).