The Interplay Between Employee and Firm Customer Orientation: Substitution Effect and the Contingency Role of Performance‐Related Rewards
| Author | Dennis Herhausen,Luigi M. Luca,Michael Weibel |
| Published date | 01 July 2018 |
| Date | 01 July 2018 |
| DOI | http://doi.org/10.1111/1467-8551.12230 |
British Journal of Management, Vol. 29, 534–553 (2018)
DOI: 10.1111/1467-8551.12230
The Interplay Between Employee and Firm
Customer Orientation: Substitution Eect
and the Contingency Role of
Performance-Related Rewards
Dennis Herhausen,1Luigi M. De Luca2and Michael Weibel1
1Institute of Marketing, University of St. Gallen, Dufourstr. 40a, 9000 St. Gallen, Switzerland, and 2Cardi
Business School, Cardi University, Colum Drive, Cardi CF10 3EU, UK
Corresponding author email: dennis.herhausen@unisg.ch
This paper identifies and explains a potential tension between a firm’s emphasis on cus-
tomer orientation (CO) and the extent to which employees valueCO as a success factor
for individual performance. Based on self-determination theory and CO implementation
research, the authors propose that firm CO may represent both autonomous and con-
trolled motivations for CO, but that employees’ CO is more strongly linked to individ-
ual performance when employees experience solely autonomous motivation. Hence, the
authors expect a substitution eect whereby the link between employees’ CO and their
performance is weakerwhen firm CO is high. Further more,the authors examine a bound-
ary condition for the previous hypothesis and propose that performance-contingent re-
wards have a positive eect on the internalization of the extrinsic motivation stemming
from firm CO. Twomultilevel studies with 979 employees and 201 top management team
members from 132 firms support these hypotheses. Against previous research, these find-
ings oer a new perspective on the eectiveness of CO initiatives, propose employees’
motivational states as the theoretical explanation for the heterogeneity in the link be-
tween employeeCO and performance, and reappraise the role of performance-contingent
rewards in CO research. Managerial implications for the eective implementation of
customer-oriented initiatives within firms are provided.
Introduction
It is widely accepted that a firm’s ability to benefit
from customer orientation (CO) is contingent
on the employees who implement it (e.g. Brach
et al., 2015; Kennedy, Lassk and Goolsby, 2002;
Lin et al., 2016). Many companies are acting
on this belief, as witnessed by organization-wide
CO initiatives such as GE’s Gold Standard in
Marketing Program and Macy’s Customer Cen-
tric Initiative. However, many of these eorts
The authors thank Heiner Evanschitzky and the anony-
mous reviewers, Ajay Kohli, and participants of a
research seminar at the University of St. Gallen for their
helpful comments on previous drafts of this paper.
are ineective. For example, evidence indicates
that, while 56% of firms perceive themselves as
being very customer oriented, only 12% of their
customers agree (CMO Council, 2008). Critical to
the success of CO initiatives is the understanding
of what motivates employees to adopt a CO.
The CO implementation literature suggests two
such motivations: the need to complywith the nor-
mative mandate of the firm (Gebhardt, Carpenter
and Sherry, 2006) and the self-driven recognition
of CO as an important job value (Zablah et al.,
2012). These two motivations can be dierentiated
in line with self-determination theory (SDT), a
macro theory of motivation that explains how
employees identify with values and behaviours
© 2017 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
Employee and Firm Customer Orientation 535
that are endorsed by their firm (Gagn´
e and Deci,
2005; Ryan and Deci, 2000). First, organizational
leaders establish, diuse and institutionalize
customer-oriented values and norms in top-down
CO initiatives (e.g.Stock and Hoyer, 2005). In line
with the normative perspective of the CO litera-
ture, SDT suggests that, as a result of organiza-
tional CO initiatives, employees will become more
customer oriented in response to an inducement
by an external agent. This external source of CO
may lead employees to internalize the importance
of CO in their work value set (i.e. autonomous
motivation) and/or to act based on a certain sense
of pressure and obligation (i.e. controlled motiva-
tion). Second, employees’ identification with CO
as a work-related value may also be a self-induced
choice, driven by inherent personal interest (i.e.
autonomous motivation). Thus, employee CO can
result from a purely autonomous motivation (low
external stimulus for CO, high personal interest in
CO), from a relatively controlled motivation (high
external stimulus for CO, low personal interest in
CO) or from a combination of both (high external
stimulus for CO, high personal interest in CO).
Importantly, there is growing consensus in
recent SDT research that autonomous and con-
trolled motivations coexist independently of
each other in the work context (e.g. Cerasoli,
Nicklin and Ford, 2014; Gerhart and Fang, 2015;
Grant et al., 2011). Moreover, SDT research
indicates that the combination of controlled
and autonomous motivations towards the same
behaviour may lead to dierent performance
outcomes for employees (Gagn´
e and Deci, 2005).
For example, Grant et al. (2011) found across
two studies that the same level of initiative among
highly autonomously motivated employees was
more positively related to performance when they
reported low levels of controlled motivation. This
may pinpoint a potential tension between firm
CO and individual CO. If employees perceive
firm CO as controlled motivation, CO will not be
fully internalized and therefore the relationship
between employee CO and performance will be
weaker. In contrast, if firm CO is perceived as a
driver of autonomous motivation, the employee
CO–performance link will be stronger, owing to
a higher degree of CO internalization. Despite
the relevance of this issue for understanding
employees’ motivation for CO, no previous study
has investigatedthe cross-level interaction between
organizational CO and employee CO in relation
to employee performance. Thus, the overarching
research question of this study is: Under what
circumstances will firm CO induce autonomous
(versus controlled) motivation?
While taking into account a wide range of
individual and organizational factors, we iden-
tify performance-related rewards as the key
contingency variable to address our research
question (Gerhart and Fang, 2015). We advance
that performance-contingent rewards may help
direct firm CO towards increasing employees’
autonomous motivation for CO, and have a
positive eect on the internalization of firm CO
(Gagn´
e and Deci, 2005; Ryan, Mims and Koest-
ner, 1983). To date, there is limited knowledge of
the role of performance-related rewards in CO
research; existing studies advancing a direct link
between performance-related rewards, employee
CO and employee performance often report
non-significant results (e.g. Liao and Chuang
2004; MacKenzie, Podsako and Rich, 2001;
Schmitz and Ganesan 2014). Recent contributions
have suggested adopting a contingency approach
when studying the eectiveness of performance
incentives (Gagn´
e and Deci 2005; Gerhart and
Fang, 2015). Following this line of research, in
this study we examine how the interplay between
performance-contingent rewards, firm CO and
employee CO aects employee performance.
We test our conceptual framework through two
multilevel studies consisting of three independent
samples composed of 979 employees and 201 top
management team members from 132 firms. We
use two dierent contexts, back-oce employees
in Study 1 and customer-contact employees from
various business-to-business (B2B) companies in
Study 2, to strengthen the external validity of our
findings. In Study 1, we find that employee CO is
positively related to employee performance when
firm CO is low, but not when firm CO is high. In
Study 2 we replicate this result and additionally
find that performance-contingent rewards coun-
teract the buering eect of firm CO, such that
when these rewards are present, the positive rela-
tionship between employee CO and performance
holds under both high and low levels of firm CO.
Our work provides three major contributions
to the management literature (see Table 1). First,
we identify an interesting substitution eect
between the emphasis a firm places on CO and
the extent to which employees perceive it as an
individual success factor. Our model suggests that
© 2017 British Academy of Management.
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