ASYMMETRIC INFORMATION

Asymmetric Information and Organizational Design

Asymmetric Information and Organizational Design

Introduction

In an effort to ward off competition and decrease direct price competition, many have recommended that firms differentiate themselves by offering better service (Kenyon and Vakola, 2003). The results of such strategies, however, have been mixed.

The strategy is typically conceptualized as a virtuous chain of effects beginning with increasing employees' satisfaction of an organization's service climate that in turn is expected to increase customer satisfaction and loyalty. This in turn is expected to lead to improved business results (for example, Heskett et al., 1994; Schneider et al., 2003). The direct implication of these models is that employee satisfaction, customer satisfaction, and profits are all positively linked.

Both practitioners and researchers have experienced problems with the actual implementation of such a chain of effects (Kamakura et al., 2002; Pritchard and Silvestro, 2005; Silvestro and Cross, 2000). One possible explanation may be a result of the structure of the relationship between the various variables. For example, recent discoveries in satisfaction research have confirmed that the nature of the relationship between attribute satisfaction and overall satisfaction, and overall satisfaction and business outcomes is asymmetric and non-linear (Anderson and Mittal, 2000; Keiningham et al., 2003; Mittal and Kamakura, 2001).

Similarly, employee measures have been found to hold non-linear effects across a number of areas with regard to organizational behavior. For example, the relationship between leader-member exchange and intent to turnover (Harris et al., 2005), self-evaluations and goal commitment (Bono and Colbert, 2005), and tenure as a moderator to the commitment-job performance relationship (Wright and Bonett, 2002) have all been shown to have a non-linear nature. Most importantly as it relates to this research, the relationship between employee satisfaction with different job factors and overall employee satisfaction is proposed to be non-linear and asymmetric (Matzler et al., 2004).

As a result, positive changes in employee and customer satisfaction, in and of themselves, may not be enough to generate positive changes in revenue. Instead, as has been proposed by other researchers, there may be thresholds of perceived performance that must be consistently met (and/or exceeded) in order to generate positive changes in sales (Keiningham and Vavra, 2001; Zeithaml et al., 1996).

In support of such a conclusion, Cooil et al. (2006) found that with regard to the relationship between customer satisfaction and share of wallet, both the initial satisfaction level and the change in satisfaction were significantly associated with changes in share of wallet. This finding implies that both consistency of customers' satisfaction and the degree of change in satisfaction impacts business outcomes.

To date, however, there is little empirical evidence to support such a conclusion regarding either customer satisfaction, or employee satisfaction. Rather, it must be inferred as a logical extension of current findings.

Therefore, a need exists for research to determine if there is evidence that both consistency of employee and customer satisfaction, and change in employee and customer satisfaction impact business outcomes. This research provides an exploratory examination of the relationship between changes in, and consistency of customer satisfaction and ...