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Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
Leadership’s Role in Employee Retention
Gary Covella, Vikkie McCarthy, Belal Kaifi, and Daniel Cocoran
Abstract Using a framework of social exchange theory (SET) to demonstrate the
outcome of a leadership-employee centered model, this study demonstrated the
vital role that the relationship between employee and leaders play in influencing
an employee’s future career decisions. Leader-member exchange (LMX) was
proposed to have a mediating effect on this model. Survey research of 402 fulltime
employees recruited through Amazon MTurk from a diverse selection of
industries was used to explore these relationships. The survey instrument
included measures of person-job fit, turnover intention and employee work
engagement factors such as vigor, dedication, and absorption. This study
contributes to literature regarding P-J fit, LMX, and employee work engagement
empirically tested within a single framework. Results confirm that person-job fit
has an inverse relationship to turnover intention and mediated through LMX and
employee work engagement.
Key words: Person-Job Fit,
Employee Work Engagement,
Leader-Member Exchange
Available online
www.bmdynamics.com
ISSN: 2047-7031
INTRODUCTION
Organizations across a wide range of industries recognize that skilled human capital is vital to achieving
successful business objectives (Maamari & Alameh, 2016). Firms that can recruit, train, and hold these
highly skilled employees prosper, while organizations that focus solely on resources merely labor to stay
on top (Holtom, Mitchell, Lee, & Inderrieden, 2005). The unexpected loss of employees is recognized as a
global issue that affects overall business performance regardless of industry (Tariq, Ramzan, & Raiz,
2013). The cost to the organization of losing these employees and consequent search for suitable
replacements presents an immense challenge to firm resources (Bandura & Lyons, 2014). One way to
address negative business outcomes is to explore organizational behaviors that may affect employee
turnover (Low, Ong, & Tan, 2017). Recent studies suggest a significance in expanding the criteria for
turnover research, to include the effects of time over updated research models (Woo, Chae, Jebb, & Kim,
2016).
Earlier research on turnover intention indicated that individual ability plays a key role in the desire to
remain on the job, as firms select the most highly-qualified applicant to fill work requirements who may
later become dissatisfied with their work (Forbes & Barrett, 1978). Prior research has recognized the
leader’s vital contribution in influencing an employee’s decision to stay on the job (Vecchio, 1985). More
recent research on turnover intention identified a need to research how person-fit may help researchers
understand how “the right person” who is completely immersed in their work, may be less likely to
voluntarily terminate their employment (Memon, Salleh, Baharom, & Harun, 2014). This study also
addresses key gaps in literature concerning the role employee work engagement has between person-job
and turnover intention while addressing leadership-member exchange (LMX) and its role in mediating
the employee work engagement/turnover-intention model (see Fig. 1).
Figure 1: Hypothesized Model
Person-job fit
Employee Work
Engagement
Leader-member
Exchange
Turnover
Intention
H3
H4
H1
H2
H3a
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
THEORETICAL BACKGROUND
The theoretical framework for this study was drawn from social exchange theory (SET), which explains
how transactions in an exchange relationship evolve over time and influence positive leader-member
interactions (Blau, 1964). Social exchange relationships are based on unspecified expected exchanges of
tangible and/or intangible obligations between two parties. When an employee provides a certain
presumed benefit to the leader, reciprocity is expected in some unclarified capacity. In tandem with this
theoretical foundation, leader-member exchange (LMX) theory (Emerson, 1962) provides an even further
setting for the dyadic nature of this exchange process between the leader and the employee. Early studies
on social exchange were approached from an anthropological perspective that viewed human needs as
being met through a collective. This needs-desires model suggested that each person rewards the other
quickly and directly, enabling both to perform their work more efficiently and expediently. Blau (1964)
formed exchange theory by applying this reciprocal process to a supervisor-employee centered role,
where feelings of personal obligation, trust, and justice spur fair exchanges for loyalty, commitment, and
a desire to stay on the job. Despite these diverse views of the social exchange process, the central premise
is that benefits are conditional based on the expectation of unspecified future gain (Blau, 1964; Emerson,
1976).
Social Exchange Theory posits that the root of these transactions are the organizations that support them
(Cropanzano, Howes, Grandey, & Toth, 1997). From the organizational perspective, the employee expects
an exchange of work for pay from the organization and as such, permits recurrence of this process until
another expectation (such as higher pay) or perceived unfairness causes one party to break the exchange
(Cropanzano, Prehar, & Chen, 2002). Organizations that establish formal processes for facilitating such
exchanges are usually associated as a party of the social exchange dyad and as such, organizational
leaders are in the position to enable these transactions as part of the fair exchange. Thus, leaders are
viewed by employees as the personified representative of the organization.
Social exchange theory and LMX
Leader Member Echange theory has evolved significantly over the years (Dansereau, Graen, & Haga,
1975; Graen & Cashman, 1975; Graen & Scandura, 1987), as researchers refocused conceptually from
group-differences to a dyad level of research (Graen & Uhl-Bien, 1995). LMX is described as a means of
negotiation that leaders provide to subordinates in exchange for a desired behavior or work outcome.
Prior studies on leaders assumed a broad approach to subordinate relationships in that the quality of
these relationships were homogenous across the entire organization. Additionally, it was assumed that
leaders prescribed the same style among all subordinates. LMX theory provides that subordinate
relationships are indeed unique, and each interaction between leader-member is seen as a distinct effect
(Dansereau, Graen, & Haga, 1975). As a theory, LMX is based on assertions of role making (Graen, 1976),
social exchange (Blau, 1964), reciprocity and equity (Deluga, 1994). In LMX, leaders impart role
expectations to employees and provide intangible and/or tangible benefits to those who carry out these
expectations. Employees accept this expectation willingly, as volunteers, and have the opportunity to
accept, reject or negotiate expectations according to their personal values and beliefs (Wang, Law,
Hackett, Wang, & Chen, 2005). Like SET in which LMX is rooted, role negotiation takes place over time as
the exchange relationship matures and leaders build different qualities of relationships with employees
(Graen, 1976; Graen & Uhl-Bien, 1995).
LMX has often been explored as a valid predictor of several employee outcomes (Gerstner & Day, 1997;
Liden, Sparrowe, & Wayne, 1997; Hooper & Martin, 2008); however, a direct effect to actual turnover, was
found to be low and non-significant across several metastudies (Gerstner & Day, 1997). Inversely, LMX
was found to have a moderately high effect on the “intention” to turnover in these same studies (p. 832).
This suggests that an active relationship must exist between leaders and employees in order for LMX to
demonstrate appropriate efficacy, rather than attempt to evaluate post-termination, where LMX is no
longer active and thus would be inapposite to hypothesis testing.
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
In social exchange research, perceived organizational support (POS) is most commonly viewed as a
means of capturing the quality of support an employee feels for an organization as a whole (Settoon,
Bennett, & Liden, 1996), where supervisor-employee relationships use the LMX model (Eisengerger,
Huntington, Hutchison, & Sowa, 1986). In this research, we focus on the supervisor-employee
relationship and argue that LMX is positioned to influence a first-order mediation effect on employee
work engagement, rather than as a direct effect on turnover-intention. How LMX affects turnover intent
was proposed by Dansereau, Cashman, and Graen (1973), who suggested that highly functional leader-
member exchanges would best predict turnover intent, especially when the leader shows concern for the
welfare of others, and when they also define how work is to be performed. Early work on LMX
emphasized the two-way vertical exchange between leader and subordinate, or vertical dyad linkage
theory (Dansereau, Graen, & Haga, 1975; Graen, 1976; Graen & Cashman, 1975) much like Blau’s (1964)
original theories on social exchange, which underscores the dyadic nature of the model.
A significant distinction between SET and LMX, is that a working relationship exists in LMX rather than
interpersonal friendship or broad social roles which can be applied to SET observations (Graen & Uhl-
Bien, 1995). This is important to note since the LMX-7 instrument specifically measures the employee’s
perception of relationship quality with their organizational leader when aligned with their established
work role expectation (p. 237). The relationship between leader and subordinate involves developing
variable levels of LMX, either high or low (Henderson, Liden, Glibkowski, & Chaudhry, 2009) and can be
positive, negative, or mixed. This variability among LMX groups within the same organization has been
found to moderate group level teamwork and team effectiveness (Herdman, Yang, & Arthur, 2017). This
high-quality aspect also promotes greater job satisfaction and provided increased control over their own
work (Ariani, 2012). Henderson et al. (2009) also suggested that this high-quality exchange may increase
empowerment opportunities for the subordinate. More recent studies have demonstrated that leader
behaviors do impact employee responses, as leaders directly influence employee focus behaviors through
their own self-efficacy and risk avoidance behaviors, where employee tend to follow similar behaviors
(Shin, Kim, Choi, Kim, & Oh, 2017).
Low-quality LMX are typically contingent based, where work assignments are controlled by the leader
and the employee may be less inclined to feel satisfied with their work (Calisir, Gumussoy, & Iskin, 2011;
Portoghese, Galletta, & Battistelli, 2011). Prior research has also demonstrated that LMX relationships
may have an effect on the overall organization, as the social relationships nurtured over time contribute
to employee outcomes such as satisfaction with both the job and the organization as a whole (Harris,
Wheeler, & Kacmar, 2011). Therefore, we investigate through this research how high-LMX relationships
may affect higher employee work engagement and thus, influence a lower likelihood for that employee to
seek alternative employment.
METHODOLOGY
Research Purpose and Hypothesis
Four hypotheses were tested for the purpose of exploring leaderships role in employee retention. The
first hypothesis is based on the theoretical discussion.
Hypothesis 1. LMX is positively related to employee work engagement.
Hypothesis 2. Employee work engagement is negatively related to turnover intention.
Hypothesis 3. P-J fit has a positive relationship to LMX
Hypothesis 3a. P-J fit has a positive relationship to employee work engagement.
Hypothesis 4. P-J fit has a negative relationship to turnover intention, when mediated by employee work
engagement.
Study Variables
The outcome variable, turnover intention, has been defined in previous research as an individual’s view
that he/she would leave the organization at some point in time and that the decision is a conscious and
deliberate willingness to leave (Kahumuza & Schlechter, 2008). Other research further refined that
definition as the last stage in an employee’s decision to look for alternative employment (Park & Kim,
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
2009). Since this outcome variable is closely aligned to employment consequences, we chose to survey
exclusively full-time employed individuals residing within the United States. To recruit from this pool of
employees, we used a web-based online service hosted by Amazon Mechanical Turk (www.mturk.com)
which allowed for a filtered target group.
Survey Respondents
The survey sample consisted of 402 respondents. The participants in this study consisted of 205 males
(51.2%) and 196 females (48.8%). Participant’s ages ranged from 18 years old to over 55 nearing
retirement age. The age ranges of participants were 18 years old (n=1, 0.2%), 19 to 24 years old, (n=33,
8.2%), 25 to 30 years old (n=98, 24.4%), 31 to 35 years old (n=71, 17.7%), 36 – 45 years old (n=99, 24.6%), 46
to 54 years old (n=51, 12.7%), and 55 years old or greater (n=49, 12.2%). Employee tenure on the job
ranged from a minimum of less than 12 months to a maximum of over 30 years. The respondents’ length
of employment consisted of some less than 12 months (n=44, 10.9%), 1 to 2 years (n=82, 20.4%), 3 – 10
years (n=202, 50.2%), 11 – 20 years (n=55, 13.7%), 21 – 30 years (n=14, 3.5%), over 30 years of employment
(n=2, .5) and three who declined to answer this question (0.7%). Education level varied between
respondents with some high school, but no diploma, (n=1, 0.2%), high school diploma, (n=40, 10%), some
college credit, but no degree, (n=75, 18.7%), trade/technical/vocational training, (n=11, 2.7%), associate’s
degree, (n=49, 12.2%), bachelor's degree, (n=145, 36.1%), master's degree, (n=69, 17.2%), Professional
degree, (n=9, 2.2%), and doctorate degree, (n=3, 0.7%). Firm size was represented with firms of 1 to 49
employees, (n=92, 22.9%), 50 to 999 employees, (n=146, 36.3%), 1,000 to 4,999 employees, (n=64, 15.9%),
5,000 to 9,999 employees, (n=27, 6.7%), 10,000 to 99,999 employees, (n=41, 10.2%), 100,000 or more
employees, (n=25, 6.2%), and 7 indicated they did not know the size of their organization (1.7%). Data on
employee position in the organization was collected and consisted of employees (non-supervisory),
(n=279, 69.4%), supervisor, (n=49, 12.2%), mid-level manager, (n=56, 13.9%), firm executive, (n=5, 1.2%),
firm owner, (n=4, 1%), CEO, (n=1, 0.2%), and 8 respondents declined to answer (2%).
Survey Instrument
The questionnaire is a composite of multiple research instruments used to measure specific constructs of
the model at Figure 1. All items are scored on a 7-point Likert scale. Volunteers were asked to provide a
response based on their agreement with the questions (statements) from each provided scale item. This
survey was administered through an online means using Amazon Mechanical Turk to recruit participants
and redirected to an online host, Qualtrics.
For every latent variable that cannot be directly observed or measured, there must be a series of
dimensions (two or more scale items within a latent variable) which can be used to assess these
unmeasurable constructs and also provide results that can be used to draw conclusions (Hudgens,
Dineen, Webster, Lai, & Cella, 2004). PLS-SEM is routinely used in research to measure latent variables
resulting from multiple reflective items. This questionnaire contained 30 items consisting of previously
validated survey instruments.
The independent variable, person-job fit was measured using the three-item perceived job-fit scale (Cable
& DeRue, 2002) which linked P-J fit to work related attitudes such as job satisfaction, quality of work life,
employee turnover and positive adjustment in new organizations. The items are presented as statements
and responses using a 7-point Likert scale (1 = Strongly disagree, 2 = Disagree, 3 = Somewhat disagree, 4
= Neither agree nor disagree, 5 = Somewhat agree, 6 = Agree, 7 = Strongly agree).
Leader-Member Exchange. The mediator to employee work engagement, LMX, was measured using the
seven-item LMX scale (Graen & Uhl-Bien, 1995) evaluating the dimensions of satisfaction, understanding,
recognition, authority, benevolence, confidence, and relationship with the respondent’s leader. The same
7-point Likert scale was used (1 = Strongly disagree to 7 = Strongly agree).
The mediator, employee work engagement, was measured with the Utrecht Work Engagement Scale
(Schaufeli & Bakker, 2003) consisting of 17-items. This research argues that the three classical dimensions
asserted by a (2003) are important in understanding the level of dedication in an employee based on the
positive outcomes of social exchange (LMX) proliferated in the workplace. As Macey and Schneider
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
(2008) suggested, these positive attributes imply a sense of psychological job satisfaction, which seem to
indicate that a satisfied employee will not desire to leave the state they are so engaged in. The same 7-
point Likert scale was used (1 = Strongly disagree to 7 = Strongly agree).
The dependent variable, turnover intention, was measured using the three-item Turnover Intention Scale
(TIS) developed by Sjöberg and Sverke (2000). Prior research measured turnover intention using several
different “propensity-to-leave” scales (Lyons, 1971; Camman, Fichman, Jenkins, & Klesh, 1979) which
ultimately was adapted to a three-item scale to measure overall turnover propensity (Hellgren, Sjöberg, &
Sverke, 1997). According to Sjöberg & Sverke (2000), the current scales used to measure an employee’s
desire are slightly modified from these former scales to be rewritten as statements, rather than questions.
These items were “I often think of leaving the organization,” “It is very possible that I will look for a new
job next year,” “If I could choose again, I would choose to work for the current organization.” The same
7-point Likert scale was used (1 = Strongly disagree to 7 = Strongly agree).
Analyses
Reliability testing was performed to confirm the internal consistency of the person-job fit scale as well as
the scales of leader-member exchange, employee work engagement, and turnover intention (see Table 1
below). Descriptive statistics such as measures of central tendency and dispersion were used to describe
the basic characteristics of the data. To confirm the presence of mediation within the model, the Baron
and Kenny (1986) process was used and the results confirmed through use of a Sobel test. To test the
hypothesized relationships within the model, partial least squares structural equation modeling (PLS-
SEM) was conducted.
RESULTS
Internal consistency and assumptions
The reliability of the instrument was tested for minimum internal consistency requirements. The analysis
of the scales provided Cronbach alpha reliability scores between .86 and .93, which is greater than the
recommended minimum alpha of .70 (Nunnally, 1978). The specific reliability coefficients are identified
in Table 1 along with the correlations for the mean of each scale. No items were dropped from any of the
scales since all exceeded the minimum threshold alpha of .70.
Table 1: Path coefficients, Cronbach alpha, AVE and descriptive statistics
Variables
1
2
3
4
1. Person-job fit
1.00*
2. Leader-member exchange
0.53*
1.00*
3. Employee work engagement
0.67*
0.37*
1.00*
4. Turnover intention
-0.24*
-0.18*
-0.49*
1.00*
Cronbach's α
0.90*
0.93*
0.93*
0.86*
AVE
0.84*
0.71*
0.51*
0.78*
M
5.46*
5.05*
4.84*
3.66*
SD
1.32*
1.30*
1.11*
1.82*
* p < .001
Tests for normality were conducted using both the Kolmogorov-Smirnov and Shapiro-Wilk tests. Both
tests indicated that the data does not follow normal distribution assumptions (K-S test statistic = 0.17, p <
.001; S-W test statistic = 0.90, p < .001). This indicated that nonparametric methods should be used to
conduct appropriate statistical testing and PLS-SEM is appropriate. Multicollinearity was tested through
variance inflation factor (VIF) and tolerance indicators. A tolerance of .10 or less as well as a VIF greater
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
than 10 would indicate that multicollinearity may exist and a different approach may need to be
considered with regard to further analysis on the variables (O'Brien, 2007). The assumption of
heteroscedasticity was then evaluated using the Breusch-Pagan and Koenker tests. Both tests indicated
that the distribution associated with the residuals of the dependent variable, turnover intention, was
fairly homogenous and as such, confirmed the assumption of homoscedasticity (p > .05). Good
convergent validity was determined through the evaluation of average variance extracted (AVE) for each
latent variable in which case, all exceeded the recommended threshold of 0.50 (Fornell & Larcker, 1981).
Good discriminant validity was confirmed through the use of an AVE table, where the square root of
each AVE value for each latent variable should be larger than the correlation of each pair of latent
constructs.
Data analysis
To test the hypotheses exhibited in the research model (Figure 1), we implemented PLS-SEM analysis
using SmartPLS 3.2.4. (Ringle, Wende, & Becker, 2015). This highlighted the underlying observable
variables within the structural model and illustrated the resultant latent variable effects over the outcome
variable. Additionally, PLS extends traditional multiple linear regression without the limitations imposed
by such assumptions as normality of distribution. The full research model was constructed using PLS-
SEM, which illustrated the resulting interaction effects between the predictor, mediator, and outcome
latent variables. We also used the results of PLS path analysis to test the mediating effect of: (1) leader-
member exchange on employee work engagement; and (2) employee work engagement between person-
job fit and turnover intention, using the Baron and Kenny (1986) approach to test for mediation. Using
random resampling Bootstrapping techniques, the hypotheses were analyzed to determine the
significance of the predicted relationships as well as relative effect sizes. Table 2 provides a summary of
these results.
Testing the hypotheses
The research model in Figure 2 illustrates the full PLS path model to include all items , latent
manifestations, relationships and path coefficients. All hypothesized relationships were supported with
statistically significant indicators (Table 2). Because the research model contains two mediator
relationships in additional to the direct relationship of P-J fit to turnover intention, this research was
divided into three components. The first component tested the direct relationship between the variables
using PLS path modeling. The second component tested the mediation effect of LMX between P-J fit and
employee work engagement. The third component tested the mediation effect of employee work
engagement between P-J fit and turnover intention.
Figure 2: Full research model including R2, path coefficients, and outer loadings
Business Management Dynamics
Vol.7, No.05, Nov. 2017, pp. 1-15
©Society for Business and Management Dynamics
The data in Table 2 indicated that as predicted by H1, LMX does have a positive relationship to employee
work engagement and is statistically significant (β = 0.37, p < .001). In this case, t = 8.10 and supports the
positive value of β = 0.37. The PLS analysis indicated that the null hypothesis may be rejected (LMX does
not have a relationship to employee work engagement) and thus, H1 is supported.
Table 2: Hypothesis Testing Using PLS-SEM
Hypothesis
Path
β
M
SD
t
p
H1
LMX -> Employee Work
Engagement
0.37
0.37
0.05
8.10
0.00
H2
Employee Work Engagement ->
Turnover Intention
-0.49
-0.49
0.05
10.06
0.00
H3
PERSON-JOB FIT -> LMX
0.54
0.54
0.04
13.18
0.00
H3a
PERSON-JOB FIT -> Employee Work
Engagement
0.47
0.47
0.05
9.99
0.00
H4
PERSON-JOB FIT -> Turnover
Intention
-0.24
-0.24
0.05
4.74
0.00
Table 2 also indicates that employee work engagement has a moderate negative relationship to turnover
intention as predicted by H2 (β = -0.49, t = 10.06, p < .001). This part of the model will also be used to
satisfy H4 to confirm the presence of mediation; however, these interim results indicate that H2 is
supported as well. The data in Table 2 specified a statistically significant positive relationship between P-J
fit and LMX (β = 0.54, t = 13.18, p < .001). The PLS analysis indicated that the null hypothesis may be
rejected (P-J fit does not have a relationship to LMX) and as such, hypothesis 3 was supported as
estimated. Likewise, P-J fit was hypothesized to have a positive relationship to employee work
engagement. The PLS path analysis indicated that this relationship is both moderately high and positive
(β = 0.47, t = 9.99, p < .001) and supported H3a as well. P-J fit was hypothesized (H4) as having a
negative direct effect on turnover intention. The data in Table 2 supports this hypothesis as well (β = -
0.24, t = 4.74, p < .001), providing empirical evidence that an employee’s intention to leave the job is
diminished based on their perceived fit to the job.
As demonstrated in Table 2, the relationship between P-J fit and employee work engagement, with LMX
as the hypothesized mediator, demonstrated statistical significance and confirmed a positive relationship
ABS1
PJ1
PJ2
PJ3
ABS2
ABS3
ABS4
ABS5
ABS6
DED1
11
DED2
DED3
DED4
DED5
VIG1
VIG2
VIG3
VIG4
VIG5
VIG6
TI1
TI2
TI3
LMX1
LMX3
LMX4
LMX5
LMX6
LMX7
LMX2
Leader-member
Exchange
R2 = .29
Person-job fit
Employee Work
Engagement
R2 = .55
-0.24
0.37
0.92
0.81
0.86
0.87
0.84
0.79
0.86
0.85
0.84
0.81
0.59
0.80
0.89
0.89
Turnover Intention
R2 = .46
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©Society for Business and Management Dynamics
(β = 0.47, t = 9.99, p < .001). Using the Baron & Kenny (1986) four step process model, in step 1 of the
analysis, the regression of P-J fit with employee work engagement, disregarding the mediator, was
statistically significant (β = .67, t = 21.46, p < .001). In step 2 of the mediation process, the regression of P-J
fit on the mediator (LMX), was also statistically significant (β = .54, t = 12.72, p < .001). Step 3
demonstrated that the mediator, LMX, controlling for P-J fit, was also significant (β = .37, t = 7.90, p <
.001). Finally, step 4 of the mediation process showed that, controlling for LMX, P-J fit did predict
employee work engagement, validated a reduction in variance, and was also statistically significant,
therefore, demonstrating partial mediation (β = .47, t = 9.74, p < .001). A subsequent Sobel test was
conducted and confirmed statistical significance of a partial mediation effect in the model (z = 6.81, p <
.001).
In H4, P-J fit was hypothesized to have a negative effect on turnover intention, when mediated by
employee work engagement. The data in Table 2 indicated that as predicted by the hypothesis, P-J fit did
have a negative relationship to turnover intent when employee work engagement was used as a mediator
and was also shown to be statistically significant (β = -0.24, p < .001, n = 402). The relationship between P-
J fit and turnover intention was shown to be mediated by employee work engagement as the
standardized regression coefficient between P-J fit and employee work engagement was statistically
significant, as well as the standardized regression coefficient between employee work engagement and
turnover intention. Using the Baron & Kenny (1986) four step process model, in step 1 of the analysis, the
regression of P-J fit with turnover intention, disregarding the mediator, was statistically significant (β = -
.57, t = 16.96, p < .001). In step 2 of the mediation process, the regression of P-J fit on the mediator
(employee work engagement), was also statistically significant (β = -.67, t = 20.78, p < .001). Step 3
demonstrated that the mediator, employee work engagement, controlling for P-J fit, was also statistically
significant (β = -.49, t = 10.13, p < .001). Finally, step 4 of the mediation process showed that, controlling
for employee work engagement, P-J fit did predict turnover intention, and exhibited the expected
reduction in variance, therefore, demonstrating a partial mediation effect (β = -.24, t = 4.76, p < .001).
Further analysis using the Sobel test to determine the significance of the mediation effect was used to
confirm these findings. The results of the Sobel test suggested that the association between P-J fit and
turnover intention is mediated by employee work engagement (z = -9.08, p < .001) and thus supports
partial mediation as suggested in the hypothesis.
DISCUSSION
The first hypothesis in this study addressed the social exchange nature of this research model (Fig. 2),
which states that LMX will have a positive relationship with employee work engagement. The results
from the data analysis confirm that not only is this relationship positive as predicted, but that this
exchange also serves to mediate the employee’s perceived fit to the job and increased engagement. This
corroborates previous literature, where LMX relationships were found to have an effect on the overall
organization and contributed to individual level outcomes to include employee work engagement as an
outcome (Harris et al., 2011). We use this relationship to expand this research model further and
demonstrate how LMX has an indirect role in diminishing an employee’s desire to quit the workplace.
Additionally, the empirical evidence in this model (Fig. 2) strongly suggested that the positive and
optimistic feelings associated with receiving support from a leader (Hooper & Martin, 2008) may enable
continuous feelings of obligation which prior research suggested may be in the form of increased
engagement (Saks, 2006).
We found support for our second hypothesis which stated that employee work engagement is negatively
related to turnover intention. It is assumed that employee work engagement does not already exist when
a person is initially hired into a job and as such, requires a certain amount of time to evolve, much as a
social exchange relationship requires a lengthy period of maturation. Using the social exchange
framework, research suggests that when a leader provides perceived support to their employee, that
employee feels psychologically obligated to return a like response, such as active engagement in their
work (Colquitt, Scott, & LePine, 2007). This perceived obligation is the basis for a psychological contract
between the two stakeholders, the leader and the employee. This dyadic bond is neither formal nor
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©Society for Business and Management Dynamics
written; however, it is powerful enough to increase organizational commitment and job satisfaction on
the part of the employee (Ariani, 2012). Examining the path relationship between LMX and employee
work engagement in the research model (Fig. 2) LMX is supported as a valid mediator to employee work
engagement, especially when measured with P-J fit. This agrees with previous research that suggests
employee work engagement may be a perceived reward the employee reciprocates back to the dyadic
relationship as a result of leader-provided benefits such as support, encouragement, and career
mentorship (Saks, 2006). This seems to suggest that increased employee work engagement strengthens
the self-imposed obligation to stay on the job.
This study found that P-J fit has direct a negative relationship to turnover intention, and confirms prior
research (Kristof-Brown et al., 2005; Cable & Derue, 2002; Edwards & Shipp, 2007); however, we also
introduced two important mediators to explain additional factors that reduce turnover. Fit in the
workplace, as previously defined by Kristoff-Brown et al. (2005), infers a need-fulfillment in the
employee, in that they voluntarily perform an exchange of services in return for the feeling of satisfaction
in both, the sense of belonging, as well as a useful outlet for their trained skills. The more often that a
fulfilling exchange occurs, the greater the employee becomes vested in the job, thus dimishing their
desire to leave. To highlight this point in the study, it was expected that turnover intention would yield
an inverse path coefficient with the independent variables. When modelled against the independent
variable, turnover intention was both statistically significant and negative for P-J fit. These findings
suggest that skills-ability as well as needs-supplies may also have a relationship to an employee’s future
intention to leave (Jackofsky & Peters, 1987).
P-J fit is seen as a central construct in this study, as our third hypotheses are supported statistically as a
positive link to both LMX and employee work engagement (H3 and H3a). As P-J fit is increased, LMX is
also quite moderately increased (β = .54, t = 12.72, p < .001) as well as directly to employee work
engagement (β = .47, t = 9.74, p < .001). This seems to suggest that an employee that is a good fit for the
job, where their skills and abilities are properly matched to their work, may be more willing to make
themselves vulnerable to an exchange relationship with their leader. This also suggests that P-J fit may be
a good predictor of social exchange, as the transactions in an exchange relationship evolve over time and
have been found to influence positive leader-member interactions (Blau, 1964). Likewise, P-J fit may also
be a good predictor of future employee work attitudes, as employee work engagement has also been
described in prior research as the manifestation of an employee’s sense of well-being in the workplace
(Schaufeli, Taris, & Van Rhenen, 2008) as well as being associated with other positive outcomes such as
better workplace efficiencies, greater employee retention, and stronger business results (Harter, Schmidt,
& Hayes, 2002). Thus, it can be inferred that P-J fit may predict future employee attitudes under constant
work conditions.
Our fourth hypothesis, P-J fit has a negative relationship to turnover intention, when mediated by
employee work engagement, addresses the presence of a mediator to explain turnover intention as a
consequence of P-J fit. The question is why employee work engagement works to influence an intentional
decision to quit the job. Employee work engagement is defined in previous literature as the emotional
attachment an employee has to their work and voluntarily acts in a way that furthers their organization's
interests (Kahn, 1990). Schaufeli & Bakker (2003) further enhanced this definition by providing the three
commonly measured dimensions, vigor, dedication, and absorption. These three classical dimensions
asserted by Schaufeli & Bakker (2003) are important in understanding the level of dedication in an
employee based on the positive outcomes of social exchange (LMX) as practiced in the workplace. As
some previous research suggested, these positive attributes imply a sense of psychological job
satisfaction, which indicates that a satisfied employee will not desire to so willingly leave a condition they
are deeply embedded in (Macey & Schneider, 2008).
Implications
The implication of these findings to business and educational leaders may better promote practical
human resource development solutions that could aid firms in retaining their top talent while also
benefitting internal leadership growth. For instance, firms can outsource leadership training courses
designed to increase supervisor perceptions on employee desires. This would lead to more effective
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interactions to aid in the leader-member exchange process. Likewise, that same firm can also offer
employees initial training focused on fostering open communication with their leaders. The findings in
this study will provide researchers with a better insight of the impact of social exchange on business
outcomes such as turnover intention, and focus future research efforts on predictors such as leader-
member relationships, employee task ownership, and long-term building trust. The fundamental
contribution of this study is the introduction of nested mediators to a turnover intention model to
emphasize the importance of building quality relationships between leaders and employees. Based on
our research, we provide empirical evidence to support the concept that healthy exchange between
leaders and followers stimulate an engaged workforce, thus minimizing the likelihood that the
employees would seek opportunity elsewhere. These findings present a particular challenge to firms to
find new ways of stimulating leader-member relationships and attempts to lower turnover intention.
Some studies have suggested implementing 360-degree feedback programs that include employees in
organizational work planning processes (Wells & Peachey, 2011) or create employee inspired work
design programs which include motivational, social, and improved work conditions (Chang, Wang, &
Huang, 2013). These programs may serve to instill a further sense of obligation to the organization or
contribution that promotes continuous social exchange ideology from a leader-member context. Prior
studies have indicated that employees will base their participation efforts on treatment by the
organization (Eisengerger, Huntington, Hutchison, & Sowa, 1986) and as such, employees with high
social exchange ideology respond more positively to desired organizational behaviors if they feel they are
being treated equitably by their leaders (Memon, Salleh, Harun, Rashid, & Bakar, 2014).
The very nature of employee work engagement indicates a sustained psychological trait that is not just a
momentary or fleeting state of mind by the employee (Schaufeli & Bakker, 2003). The presence of
employee work engagement, in itself, indicates that the employee is already deeply involved in their
work within the organization and thus, is considered already vested as a stakeholder. One unique
characteristic of employee work engagement; however, over other organizational behaviors such as
commitment or citizenship, is that engagement requires a two-way action. The organization must work
to include the employee who, in turn, has a choice whether to voluntarily offer a level of engagement
back to the firm (Robinson, Perryman, & Hayday, 2004). Since it is assumed that the retention of these
skilled and engaged employees naturally drive the bottom-line, the burden of establishing programs to
increase employee positive behaviors is placed upon the organization. Recognizing that robust LMX
directly impacts employee work engagement, as confirmed by this study, organizations should focus
their energy on supporting and encouraging programs designed to increase leader education as well as
increased employee involvement in stakeholder processes.
Limitations
As with most research, this study is not without certain limitations that should be addressed in future
extended research. One such limitation, is the use of self-reports in collecting survey data for research
which could create potential common method bias. This potential effect is commonly caused by an
artefactual covariance of the same respondent providing the measures for both the predictor and criterion
variables. This may be problematic in that respondents have a tendency to provide answers and organize
thoughts in methodical ways, such as found in prior research and called the consistency effect (Salancik &
Pfeffer, 1978). This study has taken the following pro-active approaches to ensure common method bias
is minimized to the fullest extent as recommended by Conway & Lance (2010).
Another limitation is the use of a cross-sectional design which does not take into account the long-term
nature of social exchange relationships and the maturity of this dynamic over time. The assumption in
this study is that this relationship has already reached peak maturity and already prevalent in the
workplace; hence, the absence of which would possibly demonstrate a poor overall fit in the person-job
construct. The longitudinal aspect of this study should be addressed in future research.
Future Research
Several recommendations for future research opportunities evolved from this study. In considering the
omitted variables from this study discussed as a limitation, an excellent opportunity exists for future
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researchers to contribute additional and expanded research in this field. While this study focused on
person-job fit, another type of fit might prove to be an interesting construct when explored at a group-
level such as person-organization (P-O) fit. Including both the organization values and individual values
(values congruence) to an alternate model can explore how an individual’s fit in the organization may
affect their long-term decision to stay (Westerman & Cyr, 2004). The objective is to explore where
compatibility between the individual and the organization fails, leading to the decision to seek
employment elsewhere. Other effects embedded with P-O fit can be used, such as work attitudes,
motivation, work group cohesion, feelings of personal success, and concern for stakeholders may prove
to be warranted variables for inclusion in an alternative model (Kristof, 1996).
Other possibilities to such a model that may highlight the social exchange aspect on reducing turnover
intention might include such concepts as level of leadership involvement, the existence of leadership
training programs, active employee feedback, or even the presence of existing reward programs (Chang,
Wang, & Huang, 2013). While this study focused on participants from the United States, it may be
noteworthy to expand this study to other regions or countries. Previous research has explored the
different effects that national culture moderates between LMX and several common constructs to include
turnover intention (Rockstuhl, Dulebohn, Ang, & Shore, 2012). Finally, since organizational culture plays
a major role in determining P-O fit (Cable & DeRue, 2002), a future study should include culture as an
external factor to explore the possible effect on turnover intention. Are some cultures more reluctant to
participate in a social exchange relationship over others or are these exchange relationships somewhat
homogenous in nature? Previous studies have addresses this question and found evidence to support
different outcomes on job satisfaction and turnover based on the type of organizational culture exhibited
by the employer (O'Reilly, Chatman, & Caldwell, 1991). When applied to this research model (Figure 2) it
might prove useful to explore the effect on turnover when used with LMX and employee work
engagement, either as an independent variable or mediator/moderator.
CONCLUSIONS
This study contributes to current theory on social exchange and turnover intention in several ways. First,
this study fills in gaps in research concerning the role of social exchange in long-term employee decisions
leading to either remaining or departing the organization. This study used a framework of SET to
demonstrate the outcome of a leadership-employee centered model. This study also demonstrated the
vital role that the relationship between employee and leaders play in influencing an employee’s future
career decisions. The strength of this relationship is further enhanced by the employee’s increased sense
of engagement in their work. The use of person-fit to predict business level outcomes has received the
attention of several researchers in recent years (Kumar, Ramendran, & Yacob, 2012; Arthur, Bell, Villado,
& Doverspike, 2006; Cable & DeRue, 2002; Edwards & Shipp, 2007; Memon, Salleh, Baharom, & Harun,
2014); however, most have not addressed this within the framework of social exchange as undertaken
through this research.
Finally, this study will also will provide business leaders with key insights on sustaining a skilled
workforce for the long-term and minimize turnover based on revised hiring practices that attempt to
match employee skills with the requirements of the organization. One such requirement is the very
nature of openly participating in a strong leader-member exchange relationship, which is necessary to
accomplish the organization’s objectives. Employees who are highly matched to a job that effectively
utilizes their abilities and skills, already predisposes them to an open and positive attitude (Edwards &
Shipp, 2007). This open and positive attitude is the very basis for executing this social exchange based
model, in that, their willingness to give and receive increases their satisfaction that the informal
obligations between both parties will be met. The result, is increased job satisfaction (Ariani, 2012) and
increased work engagement as confirmed in the results of this study.
While it may seem that most organizations would focus most of their recruiting efforts on job fit, the
rapid pace of achieving fast competitive advantage in the global marketplace may direct the immediate
hire of employees as job-fills rather than focusing on the “right-fit” candidate. The trade-off to this
principle may be a short-term solution to fill a job requirement rather than the long-term strategy for
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retaining top talent in an organization. This research helps highlight those areas that require additional
attention by leaders such as fostering supervisory relationships with their employees, including them in
feedback participation, and how well they will embed themselves in their tasks to accomplish the
organization’s mission. Based on the results of this study, organizational leaders should be developed to
nurture a positive work environment through the deliberate establishment of social exchange
relationships with these employees, thereby potentially decreasing turnover intention and fostering a
more experienced workforce.
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