THE EFFECT OF EXCHANGE RELATIONSHIP QUALITY ON MANAGER’S TASK PERFORMANCE IN MULTI-NATIONAL OPERATIONS: THE ROLE OF BUDGET EMPHASIS AS MODERATOR
Universitas Muhammadiyah Malang
The purpose of this study is to examine the impact of exchange relationship level on the rigidity of budget emphasis and to assess the interaction effect of these variables on manager’s task performance. Data for testing two hypotheses are collected from 69 Indonesian middle managers working in three of U.S.-, Switzerland-, and France- owned construction/mining firms in Indonesia. Questionnaires were mailed to the respondents who were requested to respond to questionnaires designed to measure their level of exchange relationship, rigidity of budget emphasis and task performance.
Results of the analyses indicate that the quality of exchange relationship between leaders and their subordinates was not directly associated with level of budget emphasis used. However, the results indicated that the combination of high (low) level of exchange relationship and high (low) budget emphasis had a positive impact on manager’s task performance. These results have implications for the design of management accounting systems and personnel management.
Prior research used subjective superior ratings as measures of performance to confirm the relationship between level of leader-member exchange and performance (e.g. Bauer & Green, 1996; Deluga, 1998; Deluga & Perry, 1994, Duarte et al., 1994; Dunegan et al., 1992; Dunegan et al., 2002; Graen et al., 1982; Jansen & Van Yperen, 2004; Lagace et al., 1993; Schreisheim et al., 1998; Varma & Stroh, 2001; Vecchio & Gobdel,1984; Vecchio, 1998; Wayne et al., 2002). These studies found that the quality of exchanges between leaders and their subordinates (high versus low quality) had an influence on the leaders when assessing their subordinates’ performance: subordinates who have a high-quality exchange tend to be rated higher than those with a low-quality exchange.
In relation to objective performance, Duarte et al. (1994) found that the subordinate performances in high-quality exchange were rated high, regardless of their objectively measured performance. On the contrary, the ratings of subordinates with low-quality exchange were consistent with their objective performance (especially in the short run). In other words, when the exchange relationship is high, the objective performance of subordinates is not the only factor considered by the superiors in evaluating their subordinate’s performance (Duarte et al., 1994). Objective performance may be considered as just one of the criteria of acceptable performance. As a variety of factors are considered, it is proposed that in high-quality exchange, the leaders will be more flexible in evaluating their subordinates.