• No results found

The effect of internal marketing on organizational commitment: an investigation among state-owned banks in Isfahan, Iran

N/A
N/A
Protected

Academic year: 2022

Share "The effect of internal marketing on organizational commitment: an investigation among state-owned banks in Isfahan, Iran"

Copied!
90
0
0

Loading.... (view fulltext now)

Full text

(1)

2007:053

M A S T E R ' S T H E S I S

The Effect of Internal Marketing on Organizational Commitment

An Investigation among State-owned Banks in Isfahan, Iran

Atousa Farzad

Luleå University of Technology Master Thesis, Continuation Courses

Marketing and e-commerce

Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce

2007:053 - ISSN: 1653-0187 - ISRN: LTU-PB-EX--07/053--SE

(2)

The Effect of Internal Marketing on Organizational Commitment

An Investigation among State-owned banks in Isfahan, Iran

Atousa Farzad

Lulea University of Technology Master Thesis, Continuation Courses

Marketing and Ecommerce

Department of Business Administration and Social Sciences Division of Industrial Marketing and E-Commerce

(3)

The Effect of Internal Marketing on Organizational Commitment

An Investigation among State-owned banks in Isfahan, Iran

Supervisors:

Dr. Nasim Nahavandi Dr. Albert Caruana

Prepared by: Atousa Farzad

Tarbiat Modares University Faculty of Engineering Department of Industrial Engineering

Lulea University of Technology

Division of Industrial Marketing and E-Commerce

MSc PROGRAM IN MARKETING AND ELECTRONIC COMMERCE Joint

2006

(4)

1

Abstract

The purpose of this thesis was to investigate the effects of aspects of internal marketing on organizational commitment of employees. The research was conducted among managers of state-owned banks situated in the city of Isfahan, Iran. Internal marketing is growing recognition of both scholars and professionals with the increasing commoditization of products and services and the continuing failure of techno-driven customer relationship management. The main criteria of internal marketing were derived from the literature; provided the backbone for our internal marketing dimensions. Data was gathered from a survey among 128 managers who rated self completion questions on the basis of their perception. In order to achieve the purpose, five hypotheses have been formulated that link the dimensions of internal marketing including motivation, job satisfaction, training, “understanding and differentiation”, “inter functional coordination and integration” to organizational commitment. Data analysis indicated that “inter-functional coordination and integration”, training and motivation have positive effects on the organizational commitment of employees among state-owned banks in Isfahan. Therefore if the state-owned banks want to ultimately provide a better service experience for their customers, it is recommended that more attention be directed toward enhancing organizational commitment among personnel, with a focus on the effective aspects of internal marketing.

(5)

2

Acknowledgement

During the process of this thesis, many people have helped me and make this work possible. I would like to take this opportunity to show my sincere gratitude and appreciation to all people in this thesis work. I would like to express my deep gratitude to my supervisor Dr Albert Caruana for his excellent suggestion to enter to the field of internal marketing. I really appreciate his valuable and continuous support and immediate replies during my work. I would like to acknowledge my distinguished teachers during this program especially my supervisor Dr Nasim Nahavandi for her guidance and good advices throughout the process of this thesis. Last but not least I would like to express deeply, foremost and sincerely gratitude to my parents and my husband for their love, affection and support they have extended me in my life.

Atousa Farzad 15, December 2006.

(6)

3 Table of Contents

Abstract 1

Acknowledgement 2

Chapter 1: Introduction 1.1) Background 7

1.2) Research problem 8

1.3) Importance and value of the research 9

1.4) Research Objectives 11

1.5) Research Question 11

1.6) Domain of Research 12 1.7) Applications of Research Results 12

1.8) Summary 13 Chapter 2: Literature Review 2.1) Internal Marketing 14

2.1.1) A Quick Tour of Internal Marketing History 14 2.1.2) Drivers of Internal Marketing 16 2.2.3) Main Elements of Internal Marketing 17 2.1.4) Applying Marketing-like Approach and Techniques Internally 18 2.1.5) Employee Motivation 19 2.1.6) Internal Marketing Typology 22 2.1.7) Internal Customer Supply Chain 22 2.1.8) Theoretical Development and Evolution of Internal Marketing Concept 23 2.1.9) Comparison the Internal and External Customer Satisfaction 26 2.2) Organizational commitment 28

2.2.1) Organizational Behavior 28

2.2.2) Organizational Commitment 29

2.2.3) Outcomes and Determinants of Committed Employees 30

2.3) Banking Industry 31

2.3.1) Human Resource Management in Banking System 31

2.3.2) History of Banking in Iran 33

2.3.3) Setting up Private Banks in Iran 35

2.3.4) Current Issues within the Iranian Human Resource Management 36 2.3.5) Alternatives for Banks in Competitive Environments 37

Chapter Three: Research Methodology 3.1) Introduction 39

3.2) Research Variables 40

3.3) Research approach 40

3.3) Research Type 41

3.4) Research Strategy 43

3.6) Research Design 43

3.6.1) Statistical Populations 44

3.6.2) Data collection and Type of Data 45

3.6.3) Data collection instrument: Questionnaire 45

3.6.4) Components of Questionnaire 46

(7)

4

3.6.5) Sample Selection 47

3.7) Research Quality Standards 49

3.7.1) Validity of the Research 50

3.7.2) Reliability of the Research 54

3.7.3) Pilot Study 55

3.7.4) Non Response Rate and Rate of Return 55

3.8) Statistical Methods 56

3.8.1) Multiple Regression 56

3.8.2) One-way ANOVA 57

3.8.3) The Friedman Test 57

3.8.4) Tukey Test 57

Chapter 4: Data Analysis and Research Findings 4.1) General information about the respondents 58 4.2) Hypotheses testing 65 4.3) Additional Findings 66 4.3.1) Descriptive Statistic for Perception Scores 66

4.3.1.1) Question a1: Percentages of Motivated Employees 66

4.3.1.2) Question a2: Percentages of Skillful Employees to Deliver Various Banking Services 67 4.3.1.3) Question a3: Percentages of Contact Employees 68

4.3.2) Attitudes and Views of Managers based on their Education 68

4.3.3) Attitudes and Views of Managers based on their Record 69

4.3.4) Rank of Hypotheses 71 4.3.5) Conclusions 71

4.3.6 ) Limitations 75

4.3.7) Recommendations for Future Research 76

References 77

Appendix 82

(8)

5 List of Tables

22

Table2.1) Internal marketing Typology

31

Table 2.2) Outcomes and Determinants of Organizational Commitment.

41

Table 3.1) Features of Qualitative and Quantitative Research

46

Table 3.2) Likert Scale

48

Table3.3) Frequency Distribution of Branch

49

Table 3.4) Frequency Distribution and Sample Size

51

Table3.5) Rotated Component Matrix for Understanding and Differentiation

52

Table 3.6) Rotated Component Matrix for Job Satisfaction, Training and Inter-functional

Coordination and Integration

53

Table 3.7)Rotated Component Matrix for Motivation

55

Table 3.8) Cronbach’s Reliability Coefficient

59

Table 4.1) Frequency, Percentage and Cumulative Percentage of Respondents' Sex

60

Table4.2) Frequency, Percentage and Cumulative Percentage of Respondents' Educational level

61

Table 4.3) Frequency, Percentage and Cumulative percentage of Respondents' Record

61

Table4.4) Frequency, Percentage and Cumulative percentage of Respondents' Extent of Familiarity with Internal Marketing

62

Table 4.5) The Respondents’ opinion toward the Extent of Organizational Commitment of Employees in State-owned Banks in comparison with Competitors

63

Table 4.6) The Respondents' Opinion toward the Extent of Satisfying Employees’ Needs through

Current services

64

Table 4.7) The Respondents’ Opinion Toward the Extent of Acceptability of Present Service among State-owned Banks Compared to Private Banks

65

Table 4.8) Result of Regression Analysis

66

Table 4.9) Coefficients (a)

66

Table 4.10) Frequency, Frequency Percentage and Cumulative Percentage of Motivated Employees

67

Table 4.11) Frequency, Frequency Percentage and Cumulative percentage of Skillful Employees

68

Table 4.12) Frequency, Frequency percentage and Cumulative percentage of Contact Employees

69

Table 4.13) One –way ANOVA Test of Managers’ View about hypotheses based on their Educational Level

70

Table 4.14) One –way ANOVA Test of Managers’ View about hypotheses based on their Experience

71

Table 4.15) Rank of Hypotheses

(9)

6 List of Figures

Fig 2.1) a Frame work for Internal Marketing 18

19

Fig 2.2) a Multi-level Model of Internal Marketing for Applying Marketing-like Approach and Techniques Internally

21

Fig 2.3) Maslow's Hierarchy of Needs and Herzberg’s Two- factor Model of Motivation

Fig 2.4.Dimension of Customer Satisfaction 27

28

Fig 2.5) The Interrelationship Between Internal and External Markets

44

Fig 2.6)A Schematic Representation of the General Research Design

59

Figure 4.1) Relative Frequency of Respondents based on Sex

60

Figure 4.2) Relative frequency of Respondents based on their educational level

62

Figure 4.3) Relative Frequency of Respondents' Extent of Familiarity with Internal Marketing

63

Figure 4.4) Relative Frequency Distribution of the Respondents’ Opinion toward the Extent of Organizational Commitment of Employees in State-owned banks in comparison with private competitors.

Figure 4.5) Relative frequency Distribution of the Respondents’ Opinion toward the Extent of 64

fulfilling the Employees' Needs through Current sevices

64

Figure 4.6) Relative Frequency Distribution of Managers’ Opinion toward the Extent of service acceptability of state-owned banks in comparison with private banks

66

Figure 4.7) Distribution of Motivated Employees from Managers’ Opinion

67

Figure 4.8) Frequency Percentage Distribution of Skillful Employees from Managers’ Opinion

68

Figure 4.9) Frequency Percentage Distribution of Contact Employees

(10)

7

Chapter 1:

Introduction and Background

1.1) Background

In today's world of accelerated product lifecycles, the instant diffusion of information, and rapid globalization, it is possible for every company to enter the market and competition between companies has intensified. Consequently the products and services are delivered according to customer needs and wants. The role ofmarketing management in organizations is to identify and measure the needs and wants of customers whereas customer-orientation is the foundation of successful marketing. Marketing is a term usually reserved for the process of marketing a product, service, or idea to the final consumer outside the firm but marketing also takes place within an organization. In this instance the market is not only the ultimate consumer but also an individual or a group of individuals, within the organization.

These internal customers are potentially as important as the external customers.

Internal marketing is also a mutual valuable system between internal customer (employees) and organization which attracts and retains employees as a resource of surviving growth and profitability, and tries to pave the way for partnership of employees in promoting quality of product and services for external customers. For this purpose, by using advanced systems and tools and also increasing capabilities of organizational behavior, there is a possibility of closer relationships with employees which enhances their commitment to the organization. In this chapter initially we describe the research problem and its importance and value. Then the purpose of this

(11)

8 research will be mentioned also we will discuss about the applications of research findings in state-owned banks. Later the research methodology, instruments of data gathering, statistical population, sampling method and applied statistical methods which have been used for data analysis will be explained in brief.

1.2) Research problem

Today, obtaining and retaining a dominant position in the market has become very difficult due to the vast spread of products and services and the aggressive competition on one side and increasing (internal and external) customers demands on the other side. Also rapid transitions of information age and appearance of new economies set forth customer as a valuable asset and communicating successfully with (internal and external) customers is an essential part of doing business which create competitive advantage in the external environment and enhance organizational commitment in internal environment, in a manner that all of the resources and technologies of an organization should combine with internal and external customers in order to have a sustainable competitive advantage and organizational commitment.

The service sector has a widespread spectrum and encompasses financial, welfare, transportation health and telecommunication … institutions which experiencing rapid growth in competitive markets and has more contact with customers (internal and external).Banking services as one of oldest commercial activities have a large market share in delivering various level of services quantitatively and qualitatively to various levels of external customers (individuals and companies). Iranians need to banking services is increasing more than ever and people expect more and faster services from banks. Retaining existent (internal and external) customer as well as attracting new customer.

Successful organizations are those that integrate efficient and effective management in internal and external dimensions through external customer relationship management and enhancement of organizational commitment among internal customers. The slogan of all state-owned and private banks in Iran is customer satisfaction and they try to understand customer needs and create a long-term relationship with them, in order to have sustainable competitive advantage. The internal marketing paradigm is a mechanism for the managers to analyze the

(12)

9 organizational issues which need to be addressed in implementing marketing strategies. It set to grow more important in Iranian organizations due to emerging employment patterns and its significant role in enhancing customer loyalty. Also it can help to establish an important framework of legitimacy for new directions and transformations and accommodate the constant process of change management and knowledge development. In this research we study the effects of various aspects of internal marketing including understanding and differentiation of employees, employee motivation, job satisfaction, employee training and "inter-functional coordination and integration" on organizational commitment of employees among state-owned banks in Isfahan city from viewpoint of mangers in these branches.

1.3) Importance and value of the research

The shift toward recognizing the importance of human capital in industrial age has led companies to change their paradigms about people management. Most companies no longer see employees as a resource whose primary function is to provide goods and services. Instead employees are seen as critical to the capability of service organizations. Companies recognize that motivated and responsive employees translate to happy and loyal customers. Literature indicates that internal marketing has an important role in fostering effective human resource management and bridges two normally separate disciplines: marketing especially services marketing and organizational sciences especially organizational behavior. Today many organizations believe that the most valuable asset for them is customer satisfaction. On the other hand customer satisfaction is dependent to organizational commitment of their employees. Extensive application of internal marketing has enabled companies to enjoy specific knowledge and skills about organizational behavior of their employees.

The employee loyalty are seen as critical to the capability of service organizations for effective responsiveness to external customers needs, whilst also driving down costs through reduced recruitment and training expenditure with respect to difficulty of attraction and retention of skillful employees in this competitive market, a lot of cost efficiencies accrue from committed employees. Furthermore retaining employees and managing long term relationships combined with organizational commitment has a lot of benefit, because profitability in these institutions depends upon having efficient

(13)

10 employees, and thereby reduce external marketing cost. More importantly, it prevents competitors from gaining large market share and creates or strengthens a dominant position compared to them. In order to meet the Iranians' increasing needs and expectations of banking services and improving the human resource management practices in banks which are changing under pressures from an increasingly intense competitive environment, the organizational commitments of employees have to be enhanced through specific and scientific relationship with employees and enjoyment of technology and modern methods of internal marketing. Most of Iranian state- owned banks encounter with organizational commitment in a non-scientific manner and traditional methods, despite potential opportunities and resources but due to poor and inefficient management in the affair of employee’s relationship, most of the banks could not benefit in this regard. For this reason concerning rapid growth of private banks in the state and increasing expectation of customers, in this research, we try to present best practical and scientific approaches for enhancing organizational commitment of employees among state-owned banks in Isfahan through studying the effect of aspects of internal marketing on organizational commitment, in order to be a

guide for more successful business of these banks in the growing competitive market.

(14)

11 1.4) Research Objectives

Main objective:

Determining the effect of various aspects of internal marketing on organizational commitment of employees among state-owned banks in Isfahan, Iran:

1) Determining the effect of inter-functional coordination and integration on organizational commitment of employees.

2) Determining the effect of training on organizational commitment of employees.

3) Determining the effect of motivation on organizational commitment.

4) Determining the effect of job satisfaction on organizational commitment of employees.

5) Determining the effect of understanding and differentiation on organizational commitment of employees.

1.5) Research Question

This study was intended to answer the main research question which is:

RQ: What are the effects of aspects of internal marketing on organizational commitment of employeesamong state-owned banks in Isfahan, Iran?

Related to this a set of hypotheses have been formulated from the literatures that link the dimensions of internal marketing to organizational commitment as follows:

H1: Inter functional coordination and integration has a positive effect on organizational commitment

H2: Training has a positive effect on organizational commitment H3: Motivation has a positive effect on organizational commitment

H4: Understanding and differentiation has a positive effect on organizational commitment

H5: Job satisfaction has a positive effect on organizational commitment

(15)

12 1.6) Domain of Research

A) Domain of the subject

The scope of this research generally has been limited to internal marketing and organizational commitment that considering case study, the effect of various aspects of internal marketing on organizational commitment of employees from the managers' viewpoint among state-owned banks in Isfahan has been studied.

B) Research Place

This research took place in branches of state-owned banks in Isfahan, Iran. The Mine

& Industry Bank, Post Bank and Exports Development Bank were not under the coverage of this research due to the reason that they have only a few branches.

C) Time interval

The time interval of this research was between from May to November 2006.

1.7) Applications of research results

Considering the problems in state-owned banking services and leaving state-owned banks employees and inclination toward private banks and also success of private banks as well as credit financial institutions in attracting deposits, this research familiarize authorities with existing problems in state-owned banks network and help them to adopt proper policies to present better services. It seems that the most essential problems in the branches of state-owned banks are traditional and ineffective customer relationship management and inefficiency of human resource management.

There is no doubt that dominance of state-owned banks relative to their private competitors forms through application of modern methods of internal and external marketing. The results of this research can be a guide for enhancing organizational commitment of employees, and thereby creating competitive advantage. Overall by recognition of the effective dimensions of internal marketing on organizational commitment and concentrating the abilities and possibilities of branches on these aspects, they can allocate their resources more efficiently and perform their strategies as well as proper marketing plans more successfully. In short the results of this research, in micro level, enhance employee commitment as a result of resource optimization and reduction of demands, and on macro level, help state-owned banks

(16)

13 to obtain competitive advantage relative to their private rivals. Due to lack of similar experience in the country and limited familiarity of banking network with this aspect of marketing we attempt to take steps in this field with such a research.

1.8) Summary

In this research the importance of organizational commitment and combined application of internal and external marketing especially in credit and financial institutions has been mentioned .The research problem has been stated and the objective of the research has been explained. Also the application of research results has been mentioned. Later the proposed research question and the related hypotheses have been stated .The research methodology, and data collection instruments, statistical population, sampling method and statistical methods for data analysis have been specified.

(17)

14

Chapter 2: Literature Review

2.1) Internal Marketing

2.1.1) A Quick Tour of Internal Marketing History

Over its relatively short history, internal marketing (IM) has developed along three separate and distinct tracks. The early approaches were suggested by Berry in the 1970s.Working in the area of services marketing, he developed the idea that because people were the most common form of service delivery, their actions probably had a major impact on customer acquisition, retention and migration, and thus the ultimate success of the firm. Berry approached IM from a traditional marketing view. He posited that employee jobs could be considered the firm’s products, and developed traditional marketing models and approaches that were based on the idea of making the worker’s job attractive and desirable to him or her. He employed a basic 4Ps approach that focused on the employee’s job as the product and used various forms and formats of price, distribution or place and promotion to build that desirability.

Thus, a major focus of Berry’s approach was to develop various types and forms of internal communication and promotion to encourage and build employee job satisfaction, with the idea that employee satisfaction would lead to customer satisfaction which would, in turn, build more customer loyalty. In the 1980s, Gronroos introduced the Scandinavian approach to IM. He, Gummeson and others took a somewhat different tack. They argued the employee was an important part of the overall product or service delivery equation developed by the marketing firm.

(18)

15 Thus, the customer acing employee was a key to the firm’s success. Gronroos proposed that each such employee be trained as a marketer; that is, trained to do add- on, cross-selling and the like along with ongoing customer retention skills that would enable the building of customer relationships. The balance of the organization, what he considered the ‘back-room’ or ‘back-end’, should be designed to support these customer-facing employees. Thus the focus of the organization was not just on providing an excellent customer product or service experience, but was based on building an ongoing relationship with the customer that could be converted into additional sales and profits if the employees did their ‘IM’ jobs. The company should adopt a framework similar to that of its external marketing and develop a marketing program aimed at the internal market. The goal would be to stimulate service awareness and customer oriented behavior. According to Joseph (1996), internal marketing should be incorporated with HRM theories, technologies and principles.

Cooper and Cronin (2000) believe that internal marketing is comprised of efforts within organizations to train and encourage employees to provide better services. In the 1990s two academics in the UK, Rafiq and Ahmed developed what was essentially a hybrid approach to IM. They took the best of Berry and Gronroos, added some conceptual thinking and developed another form of IM. In their approach, they proposed that IM was inherently difficult to implement because of inter-functional conflicts between departments, management and employees and the firm’s inherent resistance to change. Thus, their methodology focused on overcoming organizational inertia by identifying the specific behavioral changes employees needed to make.

They then related those behavioral changes to the various departments and groups within the firm. That provided the base for the development of cross-functional integration within the firm. While there have been other approaches, these three streams of thinking have driven IM for more than 30 years. In spite of these well developed, well-defined and well-researched streams of thought, practicing managers still find IM to be a most difficult task. Irrespective of whether a firm markets physical or service products, it seems important that they practice external marketing and internal marketing that results in effective interactive marketing that enables the successful building of long-term and profitable relationships with customers. Thus although the concept of internal marketing tends to be seen as being appropriate to service firms, it may have applications beyond this and may also be valid for firms in the consumer and industrial sectors. Internal marketing was hot in the 1980s but

(19)

16 seemingly disappeared in the ‘go-go’ days of the internet bubble of the 1990s

(Schultz, 1996) .Clearly, it is the growing recognition of both scholars and professionals that with the increasing commoditization of products and services, where differentiators are commonly short-lived or even non-existent, ongoing customer relationships with the brand and the organization may well be the only way for the firm to build long-term, sustainable competitive advantage(Knox et al, 2003).

In addition, the continuing failure of techno-driven customer relationship management (CRM) approaches reinforces that view (Chatham et al, 2001).

2.1.2) Drivers of Internal Marketing

There are many signals that Internal Marketing can be just as potently used as external marketing. There are some clear forces of change driving this momentum. Each of these drivers is increasing the need for internal marketing. (Samms, 1990)

1) Many enterprises are continually in some form of transformation-mergers, alliances, downsizing and rightsizing generating the need for constant communication.

2) Some enterprises may rename themselves as a result and this re-branding requires communication to all stakeholders including employees.

3) More companies are empowering staff to take on increased focus in the customer relationship. This needs full involvement, immersion and training in brand values.

4) There is more contract and less full-time employment. Project staffs also need to understand the brand vision as they are working. This force of change is accentuated with the increasing trend to outsourcing.

5) There is less reciprocal loyalty between employer and employee; the employee’s time becomes transactional. The internal brand can be a way to bind the two parties together with shared goals and values.

New ways of working require organizations and staff to constantly learn new skills and sometimes these are acquired through alliances. Building a learning company will be an important future consideration. Internal brand values can be an umbrella for this effort.

(20)

17 2.1.3) Main Elements of Internal Marketing

The review of the literature indicates that there are a number of competing definitions and activities all claiming to address Internal Marketing. In order to check the validity of these competing claims, what is required is a set of criteria against which to assess each definition. In 2000 Rafiq and Ahmed identified the main elements of IM From the analysis of the key literature. These are:

(1) Employee motivation and satisfaction.

(2) Customer orientation and customer satisfaction.

(3) Inter-functional co-ordination and integration.

(4) Marketing-like approach to the above.

(5) Implementation of specific corporate or functional strategies

Based on these, they define IM as “a planned effort using a marketing-like approach to overcome organizational resistance to change and to align, motivate and inter- functionally co-ordinate and integrate employees towards the effective implementation of corporate and functional strategies in order to deliver customer satisfaction through a process of creating motivated and customer-orientated employees” Basic activities of internal marketing are e.g. internal information, training of personnel, creating community spirit and motivation. These means include elements of personnel administration. Figure 2.1 shows the interrelationships between the criteria for IM and the implementation of one particular organizational strategy that is at the heart of service organizations, namely, service quality. At the centre of this framework is customer orientation which is achieved through a marketing-like approach to the motivation of employees, and inter-functional co-ordination. The centrality of customer orientation reflects its importance in the marketing literature and its central role in achieving customer satisfaction and hence organizational goals.

Rafigh and Ahmed highlighted the key role of training in customer orientation and customer satisfaction. They explained that employees also need the right type and level of training to perform their jobs. This can help to reduce ambiguity surrounding their role and help employees to meet the needs of customers more effectively. (Rafiq and Ahmed, 2000)

(21)

Sour

2.1

In 1 mar Tha mar strat rese opp doin stag inte prob

rce: (Rafiq &

.4) Apply

1995 Rafiq rketing-like at model is rketing mix tegic conte earch helps portunities i ng, it acts a ge two, inte ernal segme

be their cha

Fig

Ahmed, 2000

ying Mark

and Ahme approach operationa to internal xt. Briefly s to link in line with

s the first st ernal marke

ntation by aracteristics

g 2.1) A Fram

0)

keting-like

ed presented and techniq lized by cl

marketing at stage on external m h current a tep to transl eting resea

helping to s, motivatio

me work for In

e Approa

d a multi-st ques can b

osely inter- research, se ne, namely marketing r and future

late visions rch is show

define the ons and resi

nternal Market

ch and Te

tage model e used inte -twining an egmentation

that of dir research e

competence or mission wn to play participants istances. Th

ting

echnique

which hig ernally in a nd inter-link n, and posit rection, inte

fforts to d es and cap s of change y a role in

s into segm his helps id

es Interna

ghlighted ho an organiza king an inte

tioning with ernal marke define real pabilities. In e into reality the proces ments as we dentify for

18 ally

ow a ation.

ernal hin a eting listic n so y. At ss of ell as each

(22)

19 segment specific barriers which need to be overcome in order that implementation can successfully occur. Attempts at removing obstacles, and thereby facilitate implementation, occur at level three through the process of positioning. Internal positioning aims to overcome the barriers or gaps to implementation by virtue of creating a consistent and positive internal frame towards the change, through a process of planned manipulation of the internal marketing mix elements. Finally, the whole change process requires a longitudinal monitoring mechanism in the form of continuous internal and external research. Another point which needs to be highlighted is that the marketing department should not solely be charged with the responsibility of running internal marketing programs. The dominance of a single functional department will have a tendency to lead to, in reality or simply in perception, a sense of functional/departmental bias. The imposition perceived or otherwise, of that viewpoint is likely to create strong resistance. This strongly indicates the need to use cross-functional teams or task forces in the development and running of internal marketing programs. (Rafiq and Ahmed, 1995)

Fig 2.2) Multi-level model of internal marketing for applying marketing-like approach and techniques internally

Source: (Rafiq & Ahmed, 1995)

(23)

20 2.1.5) Employee Motivation

Since motivation influences productivity, supervisors need to understand what motivates employees to reach peak performance. It is not an easy task to increase employee motivation because employees respond in different ways to their jobs and their organization's practices. Motivation is the set of processes that moves a person toward a goal. Thus, motivated behaviors are voluntary choices controlled by the individual employee. The supervisor (motivator) wants to influence the factors that motivate employees to higher levels of productivity. Factors that affect work motivation include individual differences, job characteristics, and organizational practices. Individual differences are the personal needs, values, and attitudes, interests and abilities that people bring to their jobs. Job characteristics are the aspects of the position that determine its limitations and challenges. Organizational practices are the rules, human resources policies, managerial practices, and rewards systems of an organization. Supervisors must consider how these factors interact to affect employee job performance. Maslow's Hierarchy of Needs identifies five levels of needs, which are best seen as a hierarchy with the most basic need emerging first and the most sophisticated need last (Maslow, 1954). People move up the hierarchy one level at a time. Gratified needs lose their strength and the next level of needs is activated. As basic or lower-level needs are satisfied, higher-level needs become operative. A satisfied need is not a motivator. The most powerful employee need is the one that has not been satisfied.

Level 1- Physiological needs, Level 2- Safety needs, Level 3- Social needs, Level 4- Esteem needs, Level 5- Self-actualization needs Further, employees within the lower levels of organizations are more likely to be motivated by lower order needs, and employees within the higher levels of organizations are more likely to be motivated by higher order needs (Berl et al, 1984). In 1966 Herzberg examined motivation in the light of job content and contest. Motivating employees is a two-step process. First provide hygiene and then motivators. One continuum ranges from no satisfaction to satisfaction. The other continuum ranges from dissatisfaction to no dissatisfaction.

Satisfaction comes from motivators that are intrinsic or job content, such as achievement, recognition, advancement, responsibility, the work itself, and growth possibilities. Hertzberg uses the term motivators for job satisfiers since they

(24)

21 involve job content and the satisfaction that results from them. Motivators are considered job turn-ones. They are necessary for substantial improvements in work performance and move the employee beyond satisfaction to superior performance.

Motivators correspond to Maslow's higher-level needs of esteem and self- actualization. Dissatisfaction occurs when the following hygiene factors, extrinsic or job context, are not present on the job: pay, status, job security, working conditions, company policy, peer relations, and supervision. Herzberg uses the term hygiene for these factors because they are preventive in nature. They will not produce motivation, but they can prevent motivation from occurring. Hygiene factors can be considered job stay-ons because they encourage an employee to stay on a job. Once these factors are provided, they do not necessarily promote motivation; but their absence can create employee dissatisfaction. Hygiene factors correspond to Maslow's physiological, safety, and social needs in that they are extrinsic, or peripheral, to the job. They are present in the work environment of job context. (Allen, 1998)

Fig 2.3) Maslow's Hierarchy of Needs and Herzberg’s Two- factor Model of Motivation

Source: (Allen, 1998)

(25)

22 2.1.6) Internal Marketing Typology

Money and Foreman (1996) provide a matrix that offers an interesting typology of internal marketing. The matrix consists of two dimensions that consider “who is the marketer” and “who is the customer”. Each dimension can focus either on the department/group or the organization. The most common situation encountered (Type IV) is where the organization is both the marketer and the customer. However, the matrix provides three other possible situations; Type I is when the marketer is a department and the customer is another department; Type II is when the marketer is the organization and the customer is a department and Type III is when the marketer is a department and the customer is the organization. Such a typology can provide valuable insight into the role of internal marketing, the ways in which it can be used, as well as the circumstances under which it is appropriate.

Table2.1) Internal Marketing Typology Customer

Marketer

Source: Money and Foreman (1996)

2.1.7) Internal Customer Supply Chain

It is clear that in the twenty-first century companies can no longer afford to maintain barriers between functions and departments. Success is driven by integrating related functions within the organization – production, sales and distribution, services, advertising, sales promotion, product planning and market research; to achieve the

Department

&

Department

Department

&

Organization

Organization

&

Department

Organization

&

Organization

(26)

23 business objectives. As suggested, IM looks to guide all people, functions and departments of an organization by its systematic appreciation of the needs, aspirations and costs of each. This underpins the internal customer-supply chain, which is replayed in organizational interaction by every single employee, from top management to middle managers, all the way down to shop-floor workers.

Organizationally, this hierarchy results in a network of relationships within which different collaborations evolve as a consequence of a multiplicity of interaction episodes. Each of these relationships and interactions can be managed, where appropriate, with a formal IM strategy and IM plan. The task of managing and coordinating a web of customer-supplier relationships is certainly not easy. It is important that everyone in the organization can see the linkage between what she/he does and its impact on the next customer. Therefore, creating and aligning internal relationships between departments, functions and employees inside the organization is necessary to improve the performance of the company and its employees. IM examines and manages the total set of relationships and interactions that bring about additional value-added. Companies must gain an understanding of how to develop and manage these internal relationships, with individuals and groups of individuals. This extends not only to employees, but also to others who fall within the boundary of internal markets, such as suppliers and distributors. It is the management of these organizational sets of relationships that allows the delivery to what marketing has promised externally. (Rafiq and Ahmed, 2003)

2.1.8) Theoretical Development and Evolution of the Internal Marketing Concept

A careful examination of the literature over the last 20 years indicates the existence of three separate yet closely intertwined strands of theoretical development of the IM conceptualization, namely an employee satisfaction phase, a customer orientation phase, and a strategy implementation/change management phase. (Rafiq and Ahmed, 1995)

(27)

25 buyer-seller interactions have an impact on purchasing and repeat purchasing decisions but also, crucially, those buyer-seller interactions provide a marketing opportunity for the organization. To take advantage of these opportunities requires customer-oriented and sales-minded personnel. Hence, the object of the IM is to “get motivated and customer conscious employees” (Grönroos, 1981). In this view, it is not sufficient that employees are motivated to perform better (as in the approach of Berry and his followers), but they must also be “sales” minded. Furthermore, effective service also requires effective co-ordination between contact staff and backroom support staff. Grönroos also views the IM concept as a means of integrating the different functions that are vital to the customer relations of service companies (Grönroos, 1981).Grönroos extended his original definition of IM in 1985 as a method of motivating personnel towards customer consciousness and sales mindedness, to include the use of marketing-like activities in this pursuit: holding that an organization’s internal market of employees can be influenced most effectively and hence motivated to customer-consciousness, market orientation and sales-mindedness by a marketing-like internal approach and by applying marketing-like activities internally (Grönroos, 1985). The addition of marketing-like techniques George (1990) similarly accepts this position by asserting that IM holds that employees are “best motivated for service-mindedness and customer oriented behavior by an active marketing-like approach, where marketing-like activities are used internally”. The addition of marketing-like techniques internally, moves Grönroos’ definition closer to that of Berry’s (1981) definition, in that both sets of approaches stress the need to motivate employees, and advocate the use of “marketing-like” techniques to do it.

However, the critical difference between Grönroos’ approach and that of Berry and collaborators is that employees are not treated as customers, as is the case in the latter conceptualization. Additionally, Grönroos’ conceptualization focuses attention on creating customer orientation in employees through a process of influencing, rather than satisfying and motivating employees.

Phase 3: Strategy implementation and change management A vehicle for strategy implementation

The beginning of the third phase is marked by insights drawn from a number of authors who explicitly began to recognize the role of IM as a vehicle for strategy implementation. Winter (1985) was one of the earliest to bring to prominence the

(28)

26 potential role of IM as a technique for managing employees towards the achievement of organizational goals. Winter emphasizes that the role of IM is that of: Aligning, educating and motivating staff towards institutional objectives. The process by which personnel understand and recognize not only the value of the program but their place in it. This emphasis appears to have implanted the initial notions of IM as an implementation mechanism. The development of IM as an implementation vehicle was also aided by the growing belief that IM had potential as a cross-functional integration mechanism within the organization. In this phase the role of IM as an implementation tool/methodology is made more explicit. Initially, this viewpoint appeared in the context of services marketing in the works of Flipo (1986), and Tansuhaj et al. (1987). Later it was generalized to any type of marketing strategy by Piercy and Morgan (1991). These extensions led to IM being advocated as a general tool for the implementation of any organizational strategy whether internal or external. In due course, IM has come to be seen as a mechanism for reducing departmental isolation (Martin, 1992), reducing inter-functional friction, and overcoming resistance to change (Darling and Taylor, 1989; Rafiq and Ahmed, 1993).

This has led to a widening of IM applications to any type of organization, not merely to services. For example, Harrell and Fors (1992) apply the concept to manufacturing firms, and Ahmed and Rafiq (1995) propose it as a change management implementation methodology suitable for a wide range of contexts. The discussion of the third phase suggests that the scope of IM activity is much wider than motivation of employees towards customer consciousness. For instance, it can also be used to motivate non-contact employees towards behaving in a manner that enhances the service for end-customers.

2.1.9) Comparison the Internal and External Customer Satisfaction

Jamieson and Richards (1996) also contend that employee satisfaction and loyalty reflect the more fundamental construct of employee commitment; and that it is commitment which may be a crucial driver in reinforcing employee-customer interaction. The figure below takes the dimensions of customer satisfaction as they have been identified by Berry and Parasuraman (1991). These dimensions suggest that if we are to understand customer satisfaction, then first we should consider our

(29)

24 Phase 1: Employee motivation and satisfaction

In the early developmental phase, the majority of the literature on internal marketing focused upon the issue of employee motivation and satisfaction. The major reason behind this was the fact that the roots of the internal marketing concept lie in efforts to improve service quality. Not being automatons, individuals exhibit inconsistencies in the performance of service tasks and as a consequence cause variation in the level of delivered service quality. The problem of “variability” focused organizational efforts on getting employees to deliver consistently high quality service. The overall effect of this was to bring to the fore the issue of employee motivation and satisfaction

Viewing employees as internal customers

As Berry’s (1981) defined internal marketing is viewing employees as internal customers, viewing jobs as internal products that satisfy the needs and wants of these internal customers while addressing the objectives of the organization

Viewing their job offerings as products and their employees as customer forces managers have to devote the same care to their jobs as they devote to the purchasers of their services (Sasser and Arbeit, 1976).

Focus on employee satisfaction

The focus on employee satisfaction within these new approaches to employee management can largely be attributed to the fact that in the marketing of services much of what customers buy is labor, or human acts of performance. Consequently, attraction of the best personnel, their retention and motivation becomes of critical importance (Thompson et al. 1978; Sasser and Arbeit, 1976). Attraction, retention and motivation of high quality staff is especially critical in situations where the quality of the service is the only real differentiating factor between competitors. Infused with this logic, the challenge of creating satisfied employees and hence customer satisfaction received a vigorous impetus. The fundamental tool for achieving employee satisfaction is the treatment of employees as customers.

Phase 2: Customer orientation Interactive marketing

The second major step in the development of the IM concept was undertaken by Grönroos (1981) whose starting point was the concern that because contact employees in services become involved in what he termed “interactive marketing” it is essential that they are responsive to customers’ needs. Grönroos recognized that not only do

(30)

27 customers' expectations, how they perceive the delivery of the product or service relative to these expectations, and whether this confirms their expectations or not.

These factors will lead to satisfaction, or dissatisfaction and either complaint (to us or others) or to word-of-mouth recommendations. In the familiar setting of the external marketplace, we are generally comfortable with these ideas, as suggested in the left- hand side of figure 2.4.Jamieson and Richards (1996) also contend that a recent development has been the recognition that employee satisfaction and loyalty reflect the more fundamental construct of employee commitment; and that it is commitment which may be a crucial driver in reinforcing employee-customer interaction.

Fig 2.4.Dimension of customer satisfaction External

market Issues

Dimension of Customer satisfaction

Internal market issues Anticipated product/service

characteristic Expectation Anticipated/stereotyped

customer preferences and priorities

product/services capabilities at

point of sale and in use perceived

delivery of product/services

Internal priorities and criteria compared with external

Disappointed/Disillusionment versus positive outcome with product/service

Confirmation/

disconfirmation

Judgments about customers and attitudes affecting future behavior role stress and ambiguity Capacity to cope with and turn

around negative feedback

Complaining behavior

Hostility towards complaining customers and rejection leading to antagonism ,self protection and conflict

Source :(Berry and Parasuraman, 1991)

However, the real point of this is that there is a direct mirror-image of these same dimensions in the internal marketplace of the company itself (the right-hand side of the figure 2.4) Here expectations are to do with anticipations by people inside the company of external customer preferences and behavior, rather than the external customer's view of product/service characteristics. In the internal market, perceived delivery is about differences between internal and external criteria of what matters priorities in the back-office or the factory compared to those in the external customer marketplace. In the internal market the confirmation/disconfirmation issue is now not about the consumption of the product, but rather the judgments that people inside the company make about the external customer, and whether these expectations are met or not. When customers disappoint employees by their adverse reactions or even

(31)

28 complaints, this is likely to affect their future behavior and their comfort factors inside the company.Note that the principles of internal and external marketing are the same;

there are some differences – in targeting, politics, incentives, skills, motivation and inter-personal factors. The Interrelationship between internal and external markets has been illustrated in figure 2.5

Fig 2.5) The Interrelationship between internal and external markets

(Source: Flipo, 19860 )

The first pole is External market: its behavior influences that of contact personnel (4) and the strategy defined by the marketing manager (1). The second pole is the internal that market: its behavior influences of customers (3) and the internal strategy defined by the marketing manager (6) the third pole is the marketing function: its strategy influences both the internal (5) and the external (2) market. (Flipo, 1986)

2.2) Organizational Commitment 2.2.1) Organizational Behavior

Internal Marketing bridges two normally separate disciplines: marketing (especially services marketing) and organizational sciences (especially organizational behavior).

Organizational behavior is a field of study that draws on theory, methods, and principles from various disciplines to learn about individual's perceptions, values, learning capacities and actions ,while working in groups and within the organization and to analyze the external environment’s effect on the organization and its human resources, missions , objectives and strategies. The multidisciplinary definition of organizational behavior illustrates a number of points (Gibson et al., 2005): First organizational behavior indicates that behaviors of people operate at individual,

(32)

29 group, and organizational levels. This approach suggests that when studying organizational behavior, we identify clearly the level of analysis –individual, group and /or organization being used. Second organizational behavior is multidisciplinary;

it uses principles, models, theories, and method from other disciplines. Third, there is a distinctly humanistic orientation within organizational behavior people, their attitudes, perceptions, learning capacities, feeling and goals are important to the organization. Forth the field of organizational behavior is performance oriented. Why is performance low or high? How can performance be improved? Can training enhance job performance? These are important issue facing manager. Fifth the external environment is seen as having significant effect on organizational behavior.

Sixth because the field of organizational behavior relies heavily on recognized disciplines, the scientific method is important in studying variables and relationship.

As scientific method has been applied to research on organizational behavior, a set of principles and guidelines on what constitutes good research has emerged; Learning about behavior within organizations can help provide skills of observations, prediction and implementation.

2.2.2) Organizational commitment

Organizational commitment involves the relative strength of an individual’s identification with, and involvement in a particular organization. Here the employee is seen to be emotionally attached, identifies with the organization, and is therefore committed to pursue its goals. Meyer and Allen (1984) refer to this aspect of organizational commitment as affective commitment. Also basing on side-bet theory (Becker, 1960) there is another dimension of organizational commitment namely continuance commitment. This views the employee as being less affective and more calculative considering the costs that would result in terms of interests such as pensions and security. Namely an individual wants to stay in an organization waiting for one’s pension (Mullins 1995). This type of commitment has been measured with scales developed by Ritzer and Trice (1969) which were later amended by Hrebiniak and Alutto (1972). Continuance commitment means that withdrawal from the object would cause costs for an individual, because of invests and offers (‘side-bets’) one has done. Costs may be social and economic in nature (Brown 1996, Jaros 1997; Mathieu

(33)

30 and Zajac 1990). And finally, Allen and Meyer (1990) have added a further dimension resulting in a conceptualization of organizational commitment that encompasses not only affective commitment and continuance commitment but also normative commitment. The latter refers to employees’ feelings of obligation to stay with the organization. Such feelings of obligation result from a process of internalization of normative pressure either prior or following affiliation to an organization. Affective, normative and continuance commitments were distinguishable, but that affective and normative commitments appear to be related. (Meyer et al, 1993)

2.2.3) Outcomes and Determinants of Committed Employees

Committed employees are less likely to quite and accept their jobs, thus cost of high turnover is not incurred .and they required less supervision. Close supervision and rigid monitoring control process are time consuming and costly. Furthermore a committed employee perceives the value and organizational goals, the employee thinks of his goal and the organization’s goals in personal terms. Research shows that employees who are more committed demonstrate higher job performance, less job displeasure, less supervision, more ethical behavior, diminished intent to leave, less stress and organizational citizenship. Furthermore they perceive the value of organizational goals and think of their goals and those of the organization’s in personal terms. A lot of cost efficiencies can accrue as a result of committed employees. The table 2.2 summarizes some the outcomes and determinants of organizational commitment. (Scholl, 1981)

(34)

31

Table 2.2) Outcomes and Determinants of Organizational Commitment.

Inducement Systems Employee Affective

States Social Identity Behavioral Outcomes Reward

Pay is perceived as equitable & affirms

one's value Expectation of

continued growth in

pay

Career Pathing- employees see their

future in the organization Managerial

Leaders empower employees Leaders recognize the

contributions of employees Task

Employees see how their jobs contribute

to the mission Jobs require

employees to use valued skills Employees see the

results of their efforts

Self Concept/Worth- Individuals-

Feel valued Feel like they are

making a valuable contribution Feel that the organization does

something of value See their job as a source of validation of

skills & ability Stability- Individuals-

Feel secure and believe they have a

future with the organization Trust their leaders Reciprocity

Individual feel obligation to repay perceived

"debts" to organizations and

people in that organization

When the employing organization is a source

of self concept validation, individuals

begin to define their social identity in terms of

organization, that is, it begins to define who they

are. This means that these individuals:

Take pride in being members of the

organization Are concerned

about the reputation of the

organization

Committed Employees:

Take a long term view of membership Exhibit Extra Role

Behavior Work to advance

the reputation of the organization Defend the

organization Willing to make

investments* that commit to organizational further

Source :(Scholl, 1981)

2.3) Banking Industry

2.3.1) Human Resource Management in Banking System

The black box in the banking industry may indeed be the human resource management policies and practices used by managers. (Bartel, 2004) For many years, HRM banks like other institutions have been handling this sensitive activity through

(35)

32 respective personnel departments. This means human resources were managed like other physical assets e.g. pieces of furniture, calculators, equipment and appliances.

Success stories of large banking companies have been evident of the fact that HRM is quite different from management of physical assets. Human brain has its own peculiar chemistry. The most difficult agenda of HRM across the banking sector is to retain the right people. Sudden growth of retail banking and other services has put pressure on human resource mangers in banks to engage more professionals within shorter span of time thereby attracting manpower in other banks on attractive packages has made the job market very competing. (Samad, 2004).Literature shows that there is a direct relationship between human resource management and organizational performance.

Appelbaum et al. (2000) provided a high-performance work system framework. At the core of a high-performance work system, according to Appelbaum et al., is an organization that enables non-managerial employees to participate in substantive decisions.Opportunity to participate scale is the extent of communications with peers and with supervisors. In a branch, the manager held regular staff meetings to encourage communications between peers and between employees at different levels or in different functions in the branch. At these meetings, the employees were encouraged to identify areas for improvement and to make suggestions for change.In order to influence the actual skills of the employees, at the staff meetings manager should teach employees about new products and how to sell them. (Bartel, 2004).The high-performance work system also requires supportive human resource practices that enhance worker skills and that provide incentives for workers to use their skills and participate in decisions. Employees need to have an incentive to devote effort to meeting customer needs .They more likely make an effort if they feel that their performance is evaluated accurately and that their efforts are recognized and rewarded. Appelbaum et al. (2000) showed how these three elements of a high performance work system namely opportunity to participate, skills, and incentives, contributed to productivity in any industry. Batt (2002) argued that the high performance work system is likely to have an important impact on organizational performance in customer service settings because high involvement practices help employees develop the kind of firm-specific human capital knowledge of the firm’s products, customers, and work processes that enable them to interact effectively with customers. Indeed, organizations that compete in sales and service delivery often use a relationship management strategy in which they seek to build long-term

(36)

33 relationships with customers by providing high-quality service. Hackett et al. (1997) provided evidence in support of what they called a “service profit chain”. Literature indicates that today there is a vital need of good human resource management especially in banking firms.

2.3.2) History of Banking in Iran

Before a bank in its present form was established in Iran, banking operations had been carried out in traditional forms in the form of money changing. In1850 Money changing began to decline with the establishment of New East Bank, an originally British owned bank. The New East Bank was in fact the first banking institute in its present form established in Iran. It laid the foundation of banking operations in the country. It was a British bank whose headquarters was in London. The bank was established by the British without receiving any concession from the Iranian government. The bank opened its branches in the cities of Tabriz, Rasht, Mashhad, Isfahan, Shiraz and Boushehr. Of course, at that time, foreigners were free to engage in economic and trade activities in the country without any limitations. For the first time, the New East Bank allowed individuals to open accounts, deposit their money with the bank and draw checks. It was at this time that people began to draw checks in their dealings. According to a concession granted by the Iranian government to Baron Julius De Reuter in 1872, Shahanshahi Bank (Imperial Bank) was established. This bank purchased the properties and assets of the New East Bank, thus putting an end to the banking operations of the former. The legal center of the bank was in London and it was subject to the British laws but its activities were centered in Tehran. In 1887 the right of printing bank notes was purchased from Shahanshahi Bank and ceded to the Bank Melli of Iran. Imperial Bank continued its activities until 1948 when its name was changed into Bank of Britain in Iran and Middle East. The activities of the bank continued until 1952. In 1890 a Russian national by the name of Jacquet Polyakov, received a concession from the then government of Iran for establishment of Loan Bank for 75 year. Besides, banking and mortgage operations, the bank had an exclusive right of public auction. In 1898 the Tezarist government of Russia bought all shares of the bank for its political ends. Under a contract signed with Iran, the bank was transferred to the Iranian government in 1920. The bank continued its activities

References

Related documents

46 Konkreta exempel skulle kunna vara främjandeinsatser för affärsänglar/affärsängelnätverk, skapa arenor där aktörer från utbuds- och efterfrågesidan kan mötas eller

Exakt hur dessa verksamheter har uppstått studeras inte i detalj, men nyetableringar kan exempelvis vara ett resultat av avknoppningar från större företag inklusive

För att uppskatta den totala effekten av reformerna måste dock hänsyn tas till såväl samt- liga priseffekter som sammansättningseffekter, till följd av ökad försäljningsandel

U ostatních odvětví, v nichž mají zastoupení obchodovatelné i neobchodovatelné společnosti na burze cenných papírů, převládá vlastní nebo cizí zdroj financování

From the analysed results, we understand that companies with respect to their size and business activities in particular markets see the importance of the following factors:

6.2.1 Summary of company sectors impact on Knowledge Management This paragraph will discuss if any difference exists in companies belonging to various business sectors relation to

We further find that our profitability variables show significantly positive persistence of profit and that Commercial banks are playing a dominant role in the Nordic banking

[r]