The Relationship of Employee Perceptions of Organizational Climate to Business-Unit Outcomes

Abstract

There has been an extensive exploration of how organizational climate is related to various business outcomes, but these studies have generally examined outcomes separately or developed univariate measures that combine outcomes. These approaches fail to (a) accommodate the multivariate character of important business results and (b) facilitate the firm's need to achieve success on several dimensions. This research proposes a methodological approach new to the service domain to address these issues. Using data from a large, multinational retail grocery superstore based in continental Western Europe, this study illustrates how multivariate partial least squares (MPLS) models can be used. MPLS provides three interpretable factors of climate—Overall Organizational Climate, Self-Efficacy Versus Leader's Efficacy, and Personal Empowerment Versus Management Facilitation —that are important predictors of three business outcomes: employee retention, customer satisfaction, and scaled revenue. The use of the MPLS approach in other services domains is also explored.