The Impact of Ethical Work Climate on the Intention to Quit of Employees in Private Higher Educational Institutions

Journal of Southeast Asian Research

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Sock Lee Ching1, Daisy Mui Hung Kee2 and Cheng Ling Tan3

1,3Universiti Sains Malaysia, Penang, Malaysia

2School of Management, Universiti Sains Malaysia

Volume 2016, Article ID 283881, Journal of Southeast Asian Research, 11 pages, DOI: 10.5171/2017.283881

Received date : 1 April 2015; Accepted date : 22 June 2015; Published date : 13 June 2016

Cite this Article as: Sock Lee Ching, Daisy Mui Hung Kee and Cheng Ling Tan (2016)," The Impact of Ethical Work Climate on the Intention to Quit of Employees in Private Higher Educational Institutions ", Journal of Southeast Asian Research, Vol. 2016 (2016), Article ID 283881, DOI: 10.5171/2016.283881

Copyright © 2016. Sock Lee Ching, Daisy Mui Hung Kee and Cheng Ling Tan . Distributed under Creative Commons CC-BY 4.0

Abstract

Purpose: This paper examines the moderating effect of ethical work climate on employee engagement and intention to quit among employees working in private higher educational institutions (PHEI) in Malaysia. Work environment influences employees’ work attitude and affects work outcomes. It also impacts on the employees’ intention to quit. Literature Review: Ethical work climate is the organizational policies, procedures and practices on ethical issues. It is an individual’s perception of how ethical issues in their work environment are handled. Employees’ behavior is strongly influenced by the ethical work climate of an organization. Research Design: A purposive sampling design was employed and a self-report questionnaire was used to collect data from 152 employees working in PHEI in Malaysia. SPSS version 20 and SmartPLS version 3 were used to analyse the data. Findings: The results revealed that vigor and ethical work climate have significant negative relationships with the intention to quit, but there is no moderation effect on the direct relationship. Dedication and absorption have no significant relationship with the intention to quit. Contributions: This study reveals that the nature of relationship between vigor and the intention to quit is moderated by the ethical climate of an organization. Theoretically, this is different from the findings in Western setting. Practically, employers need to focus on increasing vigor among employees. Limitation and suggestion for future research were discussed.

Keywords: intention to quit, higher education, employee engagement, ethical work climate.

Introduction

In developing countries, World Bank’s record showed that small and medium enterprises have a turnover rate ranging from 3% to 27% (Bart & Tan, 2003). Malaysia has a surprisingly high turnover rate of 19% for small enterprises and 22% for medium-sized enterprises (GEC Business Review, 2012). A survey conducted by the Malaysian Employers Federation (2011) between June 2010 and July 2011 also revealed that the turnover rate for professional and education sector in Malaysia is 29.28%. Information on the intention to quit from 143 companies across the various sectors nationwide discovered that Malaysian companies have an attrition rate of between 9.6% and a phenomenal 75% (Malaysian Employers Federation, 2012). The high rate of turnover warranted more study to investigate the phenomenon.

Many turnover models have been utilized to explain the turnover situation across industries. The traditional model attributed turnover to behavioral factors such as job satisfaction and organizational commitment (Cohen & Golan, 2007). More recent models explored interpersonal relationship (Firth, Mellor, Moore & Loquet, 2004) and organizational culture (Park & Kim, 2009) as antecedents for the intention to quit. Given the high cost of turnover, as well as its adverse impact on organizational performance (Glebbeek & Bak, 2004), a number of studies were carried out in Malaysia to examine the issue of high turnover rate among academics in public and private universities (Ismail & Abiddin, 2009; Jantan et al., 2006; Morris et al., 2004). However, there is a lack of study on the turnover situation of private university colleges and private colleges in Malaysia. The mean for the intention to quit among academic staff in public universities was 2.48 (Khairunneezam, 2011), while the mean for the intention to quit among academic staff in private higher educational institutions was 2.85 (Chong, Khor, Lee, Ooi, & Tan, 2013). In this study, we propose that employees would leave the organization when they are not engaged with the organization. Hence, we suggest there is a negative correlation between employee engagement and the intention to quit. We also propose that a negative effect will be moderated by the ethical work climate. In other words, the negative relationship between employee engagement (vigor, dedication and absorption) and the intention to quit will be stronger when the level of ethical work climate is high. Conversely, the negative relationship will be weaker when the level of ethical work climate is low.

Literature Review

Employee engagement is an approach coming from the positivistic psychological aspect (Schaufeli, Bakker, & Salanova, 2006). It is a situation-activated psychological state, and hence can be used by employers to increase the motivation level of employees. In the employee engagement concept, employees work with vigor, dedication, and absorption (Bakker & Schaufeli, 2008). Vigor refers to high levels of energy and mental resilience while working. Dedication is the presence of a sense of significance, enthusiasm, and challenge during work. Absorption involves paying full concentration and the inability to detach oneself from work. The presence of these three states produces employees who have high level of energy and are enthusiastic about their work (Schaufeli, Bakker, & Salanova, 2006).

Employee engagement has been associated with many important organizational outcomes, such as in-role and extra-role performance, as well as job satisfaction and organizational commitment (Halbesleben & Wheeler, 2008; Hallberg & Schaufeli, 2006). Some of the advantages of engaged employees are: (1) the willingness to stay with the organization, be an advocate of the organization and contribute to organizational success; (2) perform better and are more motivated; (3) ensure higher profitability; and (4) more emotional connection with the organization (Cropanzano & Wright, 2001).

Ethical issues have become a growing concern globally (Walker, Lind, & Thibaut, 2004). International organizations, such as the Organization for Economic Co-operation and Development, the United Nations and World Trade Organization, have adopted suggestions of the Ethics Round, and reinforced the implementation of ethical practices in their organizations. The New York Stock Exchange and NASDAQ list only companies that have an established formal code of ethics in their organizations (Paine, Desbpande, Margolis, & Bettcher, 2005). In Malaysia, there is a great deal of discussion on ethical issues (Gupta & Mohamed Sulaiman, 1996; Zabid & Alsagoff, 1993). Zabid and Alsagoff (1993) commented that the ethical and moral standards of modern world have deteriorated. In addition, there is an increasing frequency of reports in the newspapers and other public communication media concerning cases of unethical behaviour, including those happened in the higher education sector (Times Higher Education, September 2015).   

Ethical issues are important because of their various benefits to organizations. Studies by Hammond and Slocum (1996) proposed that companies with a high level of ethical values and social responsibility are more profitable than others. In addition, companies that embrace ethical practices are found to get more favourable responses in terms of high productivity, integrity, and low intention to quit (Hunt, Wood, & Chonko, 1989). Ethical work climate is believed to be able to decrease work dissonance, enhance the perception of fit, and strengthen psychological contracts (Jose & Thibodeaux, 1999; Valentine & Barnett, 2003; Viswesvaran, Desphande, & Joseph, 1998). It is proposed that an individual’s perception of ethical values enhances the development of person-organization fit (Valentine, Godkin, & Lucero, 2002) and eventually lowers the intention to quit (Jaramillo, Mulki, & Solomon, 2006; Peterson, 2002).

The growth of private university colleges and private colleges in Malaysia has attracted many investors to invest in education. Some institutions operate the business in an ethical manner, while some are trying to reap as much profit as possible from the students and participants. There is a number of complaints related to the unethical practices of some of the higher institutions of learning with regards to the courses offered, lecturers employed, and false information on accreditation of courses, provision of poor facilities, and the poor implementation of programs. For example, the then Deputy Minister of Higher Education, Datuk Fu Ah Kiow, mentioned that the ministry has been receiving an average of 20 complaints a day, mostly about private institutions of higher learning (New Straits Times, 21 March 2006). As a result, an agency, the Malaysia Quality Agency, was set up to monitor the situation (The Star, Education News, 23 February 2014).

The Job Demand-Resources theory (Demerouti, Bakker, Nachreiner, Schaufeli, & Bakker, 2004) sees employee engagement and ethical work climate as resources that help employees reduce job demands. Job demands refer to the physical and mental effort required to perform the tasks. Job resources are the physical, psychological, social, or organizational features of a job that are functional in achieving work goals, reduce job demands, and physical or psychological costs associated with them (Bakker, Demerouti, de Boer, & Schaufeli, 2003; Demerouti, Bakker, Nachreiner, & Schaufeli, 2001; Hobfoll & Shirom, 1993). Job demands can result in fatigue (physical) or emotional (mental) exhaustion and they have significant relationship with negative organizational outcomes such as burnout, turnover, and withdrawal (Bakker et al., 2003). Job resources can reduce the negative impact of job demands (Hakanen, Bakker, & Schaufeli, 2006). They provide motivation to individuals, and induce productive job behaviour from employees, which result in employee engagement.

 

Employee engagement is a state where the resources are more than the demands of the job. It allows the employees to have high performance (Halbesleben & Bowler, 2007). Employee engagement can create a positive gain spiral, which brings in improved performance (Bakker & Schaufeli, 2008; Llorens, Schaufeli, Bakker, & Salanova, 2007; Saks, 2006; Salanova, Agut, & Peiró, 2005). Ethical work climate is also a state of resource abundance. If the ethical work climate of an organization is high, employees feel more secure and can focus their attention on productivity. Therefore, the higher level of ethical work climate will strengthen the negative relationship between employee engagement and the intention to quit. Conversely, the low ethical work climate will create more conflicts, which draws away the strength and energy of employees. Therefore, the lower ethical work climate will weaken the negative relationship between employee engagement and the intention to quit.

Most of the research on employee engagement was carried out in Western context, and the respondents were mainly from various industrial sectors. Furthermore, local researchers focus mainly on antecedents and consequences of employee engagement. Hence, there is a need to investigate the effect of employee engagement on the intention to quit among Malaysian employees working in PHEI. This study also endeavours to test the moderation role of ethical work climate on the direct relationship between employee engagement and the intention to quit. The present study assumes that in low ethical work climate condition, highly engaged employees will be more likely to turnover. Likewise, highly engaged employees will be less likely to turnover in high ethical work situation.

Theoretical Framework

The theoretical framework for the study is as depicted in Figure 1 below:

 

Fig 1: Theoretical Framework

Hypotheses

The meta-analysis of employee engagement literature (Halbesleben & Bowler, 2007) found strong relationship between employee engagement and the intention to quit, with correlations ranging from -0.25 for vigor, and -0.45 for dedication (Koyuncu, Burke, & Fiksenbaum, 2006; Saks, 2006). Work has provided many resources to the employees, which results in the unwillingness of employees to leave the job (De Lange, De Witte, & Notelaers, 2008). In addition, organizational ethics has great impact on various employee responses (Baker, Hunt, & Andrews, 2006; Hunt et al., 1989; Schwepker, 2001; Treviño, Kenneth, & Donald, 1998b; Valentine, Greller, & Richtermeyer, 2006). Unethical organizational environment is found to result in higher intention to quit among workers (Eisenberger, Stinglhamber, Vandenberghe, Sucharski, & Rhoades, 2002; Peterson, 2002). Unethical issues tend to increase the level of conflicts within an organization, which leads to lower organizational commitment and higher intention to quit (Sims & Kroeck, 1994; Schwepker, 1999; Mulki, Jaramillo, & Locander, 2008). Furthermore, if employees identify ethical inconsistencies in organizations, their satisfaction level will be lower and this will lead to lower job satisfaction and higher intention to quit (Pettijohn, Pettijohn, & Taylor, 2008). Ethical work climate is found to relate to role stress, job satisfaction, and organizational commitment (Babin, Boles, & Robin, 2000; Schwepker, 2001). Higher level of ethical work climate is reported to improve employee work attitude and behavior (Verbeke, Ouwerkerk, & Peelen, 1996; Wimbush & Shepard, 1994). It is believed that all employees prefer to work in organizations with positive ethical climates (Valentine & Barnett, 2003). Previous studies have proved that employee engagement is related negatively to the intention to quit. However, they have not tested the moderating effect of ethical work climate on the above relationship. Hence, the hypotheses of this study are:

Hypothesis 1:

 

Employee engagement has a negative relationship with the intention to quit.

Hypothesis 2

Ethical work climate has a negative relationship with the intention to quit.

Hypothesis 3:

 

Employee engagement has stronger negative impact on the intention to quit when the level of ethical work climate is high.


Research Method

A total of 152 usable data were collected from employees in PHEI through purposive sampling. The respondents were made up of 50% (76) males and 49.3% (75) females. The majority of respondents are married (53.9%). Around 61.8% of them are Chinese, followed by 22.4% Malays, 11.2% Indians, and 4.6% foreign nationals. Over 54% of respondents had been in the profession for more than two years. Most of them (65.2%) had been with their respective institutions for more than two years, and another 34.9% of them had been with the institution for less than two years.

Missing data were few and appeared mainly in the demographic section. Those missing data from the items of constructs were treated by the mean of two items before and after the missing value. As the data were collected using self-report questionnaires for both predictor and criterion variables, the common method variance was assessed through exploratory factor analysis (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). A total of 17 factors were extracted and the largest variance explained by an individual factor was 26.85%. Thus, common method bias is not a significant problem for the current study.

Factor analysis confirmed the three major dimensions as suggested by Schaufeli and Bakker (2003), which accounted for 71.62% of the variance of employee engagement. Factor 1 accounted for 26.95% of the variance, Factor 2 accounted for 26.18% of the variance, and Factor 3 accounted for 18.49% of the variance. All items loaded on the specified dimensions, except one item on Absorption, that is, “time flies when I am working”, which loaded heavily on Dedication (0.717). However, all the three factors were significantly correlated. Vigor correlated with dedication at r = 0.766, and absorption at r = 0.641. Dedication correlated with absorption at r = 0.655. This finding parallels the findings of the original study by Schaufeli and Bakker (2003).

A total of seven components were extracted from the items of ethical work climate, which account for 6.94% of the variance of ethical work climate construct. The variance for Factor 1, 2, 3, 4, 5, 6 and 7 are 25.13, 17.0, 5.76, 5.10, 4.94, 3.76, and 3.24 respectively. This finding does not conform to Arnaud’s (2006) result, which has a total of 6 factors only. Most constructs within ethical work climate correlate moderately with each other.

Findings

The validity and reliability of the measurement model is shown in Table 1. The loadings range from 0.649 and 0.909 for reflective measures, revealing that the measures were adequate in their content validity. Composite reliability for the constructs is above 0.9, and the average variance explained for the constructs is satisfactory, except for the ethical work climate. The loadings for indicators of ethical work climate are unsatisfactory, because they are within the range of 0.227 to 0.675. Composite reliability of ethical work climate is 0.919, and the total variance explained is only 24.9%. This means that the indicators of ethical work climate explained 24.9% of the construct.

Table 1:  Measurement Model Results 

  

Table 2 reveals the path coefficients for vigor, dedication and absorption, which were -0.214, -0.044 and -0.072 respectively. The path coefficient for ethical was -0.348. To test the significance of the beta values, a bootstrapping procedure with s re-sample of 300 was carried out. The cut-off value for this test was 1.645 (α = 0.05) and 2.33 (α = 0.01). Results indicated that vigor and ethical work climate had significant effects on the intention to quit (t < 1.645, p = 0.05). Therefore, Hypotheses 1 is partially supported, whereby only the dimension of vigor has a significant effect on the intention to quit (β = -0.2148, t = 2.111, p = 0.05). Hypothesis 2 is also supported because ethical work climate was found to influence the level of the intention to quit of employees (β = -0.348, t = 3.336, p = 0.01)(refer Table 2).

Table 2: Path Coefficients

 

**p<0.01, *p<0.05

Table 3 demonstrates that the interaction of the three dimensions of employee engagement and ethical work climate did not have a significant impact on the level of the intention to quit among employees in PHEI. The t values were below 1.645, and therefore not significant. This means that the ethical work climate does not interact with employee engagement to enhance or reduce the intention to quit of employees in PHEI. Therefore, Hypothesis 3 is not supported.

Table 3: Path Coefficients of Interaction Effect

Table 4 presents the results of the hypotheses testing. Hence, this research proved that employee engagement and ethical work climate have an impact on the intention to quit of employees in private higher educational institutions. However, there is no moderation effect of ethical work climate on the direct relationship.

Table 4: Hypotheses Testing

   

Discussion

The findings of this study expanded the literature of the intention to quit by providing empirical evidence of the relationship between employee engagement, ethical work climate and the intention to quit among employees working in higher institutions of learning within the context of a collective society like Malaysia. By understanding the correlates of the intention to quit, organizations can formalize strategies to reduce the intention to quit among employees, specifically, using vigor and ethical work climate to retain employees in PHEI. Although there is no positive interaction effect between employee engagement and the ethical work climate, the findings reveal that the significant relationship between ethical work climate and the intention to quit. This clearly suggests that the ethical work climate is also a correlate of the intention to quit among employees in PHEI. Thus, to retain employees, PHEI can increase the level of vigor and ethical work climate. Since vigor can be conceptualized as behavioral, attitudinal as well as affective-cognitive in nature, employers can use various strategies to increase the level of vigor among employees, which include improving organizational climate, providing psychological safety to employees, job redesign, giving more supervisor support, more rewards and recognition, as well as promoting procedural and distributive justice.

Ethical work climate is the socio-cultural environment of an organization. It is the shared perception of what the correct behaviour is, and how ethical situations should be handled in an organization. The climate is determined by the organization’s value system, and top management is responsible for the generation of the ethical climate, which is presented in the form of codes of conduct to influence employees’ decision-making. For employees, ethical work climate is what they experience in the organization. Thus organizations need to ensure that their employees are comfortable with the work climate, and are willing to stay on. This can only be achieved through the monitoring and enforcement of suitable rules and regulations, as well as procedures and policies in the organization. Hence for PHEI that wish to retain its valued human capital, broad and comprehensive approaches, such as ethical work climate is more appropriate.

Limitations and Suggestions for Future Research

Research had shown that turnover is related to many categories of antecedents, individual, organizational, and work-family interface. Individual characteristics such as trait, personality, and attitude; organizational characteristics such as peer relationship, leader–member exchange, organizational climate and culture, as well as the nature of job. Apart from that, family members, extended family support, and preferences of spouses may affect the turnover of individuals. In this study, focus was given to the job itself (employee engagement) and organizational climate. Future research may tap into personality variables as antecedents for the intention to quit. The interaction of personality with work environment may provide interesting data for analyzing the level of the intention to quit among employees. 

Conclusion

This study has helped to explain the turnover situation of employees in PHEI. It has found that vigor and the ethical work climate influence the intention to quit of employees. This means that the administrators of PHEI can use strategies to increase vigor among employees, and also formulate policies that increase the level of ethical work climate within the organization. Strategies to increase vigor among employees include job redesign, job autonomy and recognition, and supervisor support. Ethical work climate can be fostered through leadership behaviour, as well as rules and regulations. Turnover is a dynamic and multifaceted variable, it is suggested that future research can look into the personality of individuals in predicting the intention to quit of individuals.   

 Acknowledgment

We sincerely thanked the administrators of private universities and university colleges for giving us permission to collect data from their staff.

 



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