THE RELATIVE USE OF FORMAL AND INFORMAL INFORMATION IN THE

EVALUATION OF INDIVIDUAL PERFORMANCE

by

GENE H. JOHNSON, B.B.A., M.S. in Acct.

A DISSERTATION

IN

BUSINESS ADMINISTRATION

Submitted to the Graduate Faculty of Texas Tech University in Partial Fulfillment of the Requirements for the Degree of

DOCTOR OF PHILOSOPHY

December, 1986 •

//^,;¥

(c) 1986 Gene H. Johnson ACKNOWLEDGMENTS

Funding for this research project was provided by the National Association of Accountants, and was especially beneficial in that it allowed the author to complete the project in a timely manner. Subjects for the project were provided by the research entity which must, for the sake of anonymity, remain unnamed. Nonetheless, their partici­ pation is greatly appreciated. Early conceptual development of the project was facilitated by a number of individuals, including the doctoral students and Professors Don Clancy and Frank Collins of Texas Tech University. Also helpful were the experiences of Louis Johnson, John Johnson, Sam Nichols, Darrell Adams, and Del Shumate. The members of the committee provided valuable guidance and support throughout the project; and although not a member of the committee. Professor Roy Howell provided valuable assistance with data analysis. Finally, Professor Donald K. Clancy served not only as committee chairman but also as a role model/mentor for the author. His participation made the project interesting, educational, and enjoyable.

11 CONTENTS

ACKNOWLEDGMENTS ii

ABSTRACT vi

LIST OF TABLES viii

LIST OF FIGURES ix

I. INTRODUCTION AND BACKGROUND 1

Formal and Informal Information 2

Performance Evaluation 4

Purpose, Objectives, and Significance . . 6

Organization 7

II. PREVIOUS STUDIES OF INFORMATION

FOR PERFORMANCE EVALUATION 8

Goals and Goal-Directed Behavior 9

Early Studies on Performance Measures . . 11

Budget-Based Studies 17

Contingency Theory 19

Agency Theory 21

Markets and Hierarchies 22

Managerial Performance Appraisal 25

Informal Information 30

Summary 3 3

111 III. DISCUSSION OF VARIABLES AND RELATIONSHIPS:

MODEL DEVELOPMENT 36

Theoretical Perspective 36

Potential Explanatory Variables 41

Research Perspective 42

The Relative Use of Formal and

Informal Information 44

Attitudes Toward Formal and Informal Information 45 Locus of Control 49 Role Stress 51 Leadership Style 54 Other Relationships Among Explanatory Variables 57 Variables of Interest: Summary 58

Hypotheses 59 The Research Model 61

IV. RESEARCH METHODOLOGY 64 A Two-Phase Field Study 64

Phase One: Development of the Instrument . 66

Phase Two: A Single-Entity Sample .... 73

Statistical Analysis - LISREL 78

V. EMPIRICAL RESULTS 86 Verification of the Research Constructs . 86

Demographics and Other Potential Explanatory Variables 100

iv Testing Hypotheses with LISREL 103 Tests of Hypotheses 105 Stress as an Endogenous Variable: A Fitted Model 109 VI. SUMMARY AND CONCLUSIONS 114 Summary of Findings 114 Implications of the Use of Informal Information 119 Implications of the Relationships Among the Variables 120 Policy Implications 121 Limitations of the Study 123 Suggestions for Future Research 124 REFERENCES 127 APPENDICES A. INTERVIEW SCHEDULE 138 B. QUESTIONNAIRE 140 C. ANALYSIS OF DEMOGRAPHIC VARIABLES 147 D. THE NULL MODEL 150 E. THE ATTITUDES MODEL 153 F. THE FITTED MODEL 156

V ABSTRACT

Individual performance evaluation is a critical managerial function. Judgments of individual performance are evident in certain managerial decisions, such as those regarding the pay, promotion, and termination of subordinates. While much has been written about the measurement of performance and about performance-appraisal techniques, little is known about the information managers use in evaluating individual performance. Accordingly, this study was conducted for two reasons: 1) to study the extent to which informal information (unofficial, or "non-sanctioned") is used in individual performance evaluation, and 2) to examine the relationships among a number of explanatory variables and the relative use of formal and informal information. ' A questionnaire was used to measure the relative use of formal and informal information in performance-related decision making (the dependent variable), attitudes toward the information used (ATTITUDES), role stress, two dimensions of superior's leadership style (structure and consideration), and one personality variable (locus of control). The responses indicate that informal information \ vi is used relatively more than formal information in the | evaluation of individual performance. Further, the managers perceived the informal information easier to use and understand, more qualitative, and more confidential than the formal information.

Covariance structural equations modeling (LISREL) was used to study the relationships among the research variables. As hypothesized, attitudes toward the information are strongly related to the relative use of formal and informal information. The hypothesized relationship between the research variable ATTITUDES and role stress, and the influences of leadership style and locus of control on stress are also supported. Not supported by the data, however, are the hypothesized relationships among the relative use of formal and informal information and role stress, leadership style, and locus of control, and the hypothesized relationships among ATTITUDES, leadership style, and locus of control. The findings suggest a discrepancy between the formally agreed upon rules of governance in organizations and the true system of rewards. Contractual disputes and other dysfunctional consequences are implied. However, another plausible explanation is that the informal information is necessary in order to compensate for the inadequacies of the formal information. Thus, the formal and informal information may be complementary. vii LIST OF TABLES

4.1: Non-Response Bias Test Results 77 5.1: Responses to RUFI Items 87 5.2: Tests For Differences in RUFI Responses .... 89 5.3: Correlations Among RUFI Responses 90

5.4: Responses to ATTITUDES items 93 5.5: Tests for Differences in ATTITUDES Responses . 95 5.6: Initial Factor Loadings: ATTITUDES 97

5.7: Promax Rotated Factor Loadings: ATTITUDES ... 98

5.8: Tests for Differences by Department 101 5.9: Tests for Differences by Faction 102

5.10: Tests of Direct Hypotheses 106 5.11: Preliminary Tests of Indirect Hypotheses . . . 108 5.12: Sequential Tests of Indirect Hypotheses .... 110 5.13: Total Effects: The Fitted Model 112

Vlll LIST OF FIGURES

3.1: Preliminary Theoretical Model 37 3.2: Theoretical Model 39 3.3: Research Model 63 4.1: The LISREL Model 81

4.2: LISREL Notation 83 4.3: LISREL Equations 85

5.1: The Fitted Model 113 6.1: The Research Model in Context 117

IX CHAPTER I INTRODUCTION AND BACKGROUND

Individual performance evaluation is a critical managerial function. Many business decisions are influenced by evaluations of individuals' past performance and expectations of individuals' future performance. Generally, the accounting role in the performance evaluation process is through the use of accounting reports as measures of performance. However, the task of performance measurement is situational and decisions are made by individuals. Accordingly, the type of information obtained by an evaluator, and the extent to which each type of information is used in arriving at a decision vary from situation to situation and from individual to individual. Many organizations have attempted to structure the performance evaluation process (or related decisions such as pay, promotion, termination, etc.) by adopting policies, procedures, guidelines, and standards. These "formal" systems are designed to produce a performance report and are intended to support personnel decisions. However, the individuals who make the decisions are subject to a variety of influences such as additional information and the opinions of others. It is naive to assume that individuals rely strictly on the output of formal information systems when making performance related judgments and decisions. This study addresses the relative use of formal and informal (other) information in the evaluation of individual performance and the relationships among relative reliance on informal information and a number of potential explanatory variables.

Formal and Informal Information Information can be classified in a variety of ways. In studying organizations it may be useful to classify information according to function (operations support, external reporting, decision support, etc.). It may also be useful to classify information as either formal or informal [Banbury and Nahapiet, 1979; Clancy and Collins, 1979; Dirsmith and Covaleski, 1985; Jiambalvo, Watson, and Baumler, 1983]. Formal information systems can be thought of as those "sanctioned" by senior management, the output of which becomes a part of "organizational awareness" [Clancy and Collins, 1979]. Formal systems are characterized by policies, procedures, and other documentation. A formal performance evaluation information system would frequently involve accounting and/or personnel department participation with performance represented numerically. Suggestions or guidelines as to the factors to be considered and the "weight" to be assigned to each factor when making performance judgments would often be included.

The output of formal systems can be referred to as formal information. Accordingly, any other data relevant to a decision is informal information. Informal information systems need not be documented, sanctioned, or otherwise "official" in order to be relied upon. Unlike formal systems, informal information systems are difficult i to characterize. Such systems range from detailed records maintained methodically, to hearsay, rumor, and memory. Informal systems may even be computerized. Informal information may be indirectly incorporated into an "official" system, reflected primarily as adjustments or modifications to formal information, or overtly relied upon and incorporated into the formal system. Informal information may affect decisions but otherwise never be documented or made known to others. Also, informal information may be in non-numeric form, and in fact, may be perceived by some managers as the antithesis to formally measured performance. The only distinguishing factor is that informal information is not produced or required by the formal system.

It is likely that the accounting function in an organization is a part of the formal information system, although accountants' participation in an informal system is not precluded. It is also likely that performance related decisions are based on both formal and informal information.

Performance Evaluation Performance evaluation is a process that serves judgmental purposes (retention, promotion, and reward) and developmental purposes (planning, training and development, and superior/subordinate communications) [Jiambalvo et al., 1983] . The part of the evaluation process involving accounting is the measurement process, which results in numerical representations of events and transactions [Flamholtz, 1980]. Performance measurement involves the application of both procedural rules and instruments to observable characteristics of performance. The performance measurement process may be formal or informal just as other aspects of the evaluation process may be formal or informal. In formal performance measurement the rules and instruments have been established and sanctioned by senior management. With informal performance measurement either the instrument or the procedural rules of application, or both, will not be sanctioned. Judgment may or may not be involved in application of the instruments and rules. Performance evaluation is intertwined with other business activities. Company commitments are based upon assumptions of individuals' future performance. Production scheduling and other resource allocation decisions are affected by perceptions of the performance of the individuals involved. Virtually any business-related decision is in some way affected by the decision maker's judgments and expectations about individuals' performance. Accordingly, performance evaluation is likely to be a continual process rather than a periodic exercise. However, the evaluation of performance assumes a periodic nature because the intensity of the process is much greater at some times than others. There are specific periodic decisions made by managers in which performance judgments are manifest, such as pay, promotion, and termination decisions. Also, many businesses require managers to document evaluations of subordinates' performance at regular intervals or specified times regardless of the need for pay increase, promotion, or termination.

Performance evaluation is by necessity a judgmental process. The evaluator will consider the pattern of performance measures and must make a judgment regarding the quality of the overall performance: poor, adequate, good, or outstanding. When the evaluator is the superior to the person evaluated, the judgments made will influence decisions on retention, salary, promotion, and assignment. Jiambalvo et al. [1983] classified performance evaluation processes as formative ("coaching" purposes) and summative (a necessary precedent to pay and promotion decisions). The concept of "summative evaluation" [Jiambalvo et al., 1983; Zedeck and Kafry, 1977] is particularly useful in the following discussions.

Purpose, Objectives, and Significance The purpose of this study was to improve our understanding of the sources of information relied upon by individuals in making performance related decisions in organizations. It was intended to gather and interpret evidence regarding the relative use of formal and informal information. More specifically, there were two research objectives: 1. To examine the extent to which informal information is relied upon relative to formal information (RUFI) in performance-related decision making, and 2. To study the relationships among a number of a^ priori explanatory variables and RUFI. The results contribute to the small body of informal information systems literature, and may stimulate additional research efforts and contribute toward improvement in both systems design and performance measurement. Empirical evidence of the relative importance of informal information systems in the accounting literature is scarce—few published works have been located. 7 Organization In the following chapter, selected relevant works are reviewed and discussed. Chapters III and IV provide discussions of the relationships among the variables of interest and the research methodology applied. The empirical results are presented in Chapter V, and the conclusions and implications are discussed in Chapter VI. CHAPTER II PREVIOUS STUDIES OF INFORMATION FOR PERFORMANCE EVALUATION

Performance evaluation and performance information utilization research has generated a substantial literature. Selected representative works on goals and goal-directed behavior demonstrate individuals' needs for performance related information. Early studies on organizational performance measures and budget-based studies illustrate the importance of performance-related information and suggest a need for informal information. When applied to information systems in organizations, contingency theory provides a framework for discussing a number of factors with the potential to influence the systems' effectiveness. From a total labor force perspective, both agency theory and the markets and hierarchies paradigm are consistent with informal information usage. Finally, research addressing managerial performance measurement and appraisal, and studies of informal information in organizations are particularly relevant.

8 Goals and Goal-Directed Behavior One way in which individual performance evaluation influences the attitudes and actions of individuals is through communication of the results. The information exchanged facilitates individuals' goal setting processes and constitutes feedback (knowledge of the results of goal-directed behavior). Goals and goal-directed behavior were discussed by Lewin, Dembo, Festinger, and Sears [1944] in relation to their concept of "level of aspiration," and their associated "resultant valence theory." Lewin et al., hypothesized that the choice of level of aspiration is the result of three factors: the seeking of success, the avoiding of failure, and a probability of success judgment. The strength of each of these three factors is dependent upon situational influence and individual characteristics. Thus, levels of aspiration (goals) are a function of an individual's perceptions and attitudes regarding the desirability and likelihood (valences) of success vs. failure in goal attainment. Further, levels of aspiration are altered as information and experience influence perceptions and attitudes. In addition to facilitating goal setting, the revealed output of both performance measurement and evaluation provides the subordinate with knowledge of the results of goal-directed behavior (feedback), which is related 10 strongly to performance [Becker, 1978; Locke, 1968; Erez, 1911J Locke, Shaw, Saari, and Latham, 1981; Cook, 1967; Pavett, 1983; Ilgen, Fisher, and Taylor, 1979]. Based on a comprehensive review of goal setting and task performance in laboratory and field studies, Locke, Shaw, Sari, and Latham [1981] noted that performance is effected (improved) only when goals are set and feedback is provided: Goal setting is most likely to improve task performance when the goals are specific and sufficiently challenging, the subjects have sufficient ability (and ability differences are controlled), feedback is provided to show progress in relation to the goal, rewards such as money are given for goal attainment, the experimenter or manager is supportive, and assigned goals are accepted by the individual [p. 125; emphasis added]. Since goals are determined by individuals' perceptions and attitudes regarding future outcomes and likelihoods [Lewin et al., 1944], goals must be expected to change over time as information and experience influence perceptions and attitudes. Although not explicitly recognizing the influence of information on performance through goal setting. Cook [1967] studied the effects of frequency of feedback on attitudes and performance. In a simulated business setting, student subjects receiving performance reports more frequently were more successful and had more positive attitudes than other student subject participants. In spite of methodological weaknesses in Cook's study as discussed by Becker [1967] and Jensen [1967], the study 11 provides empirical evidence of the need for, and importance of, timely feedback regarding performance.

Relevance to the current study Performance-related information has been found to be important in improving performance through its influence on goal setting and on goal-directed behavior. A number of characteristics of the information, such as timeliness, are also important. Information, formal or informal, should be frequent, specific, involve the job challenges, and concern subordinates' abilities and the use thereof. The information should relate to agreed upon goals and evidence the performance-reward relationship. Of particular relevance to this study is the implication that perceptions regarding certain characteristics, or attributes of the information are indicative of the information's usefulness. Accordingly, the relative use of formal and informal information is likely to be influenced by perceptions regarding certain attributes of both the formal and informal information.

Early Studies on Performance Measures Some work has focused on the measurement and control of various parts of an organization (segments, divisions, profit centers, investment centers) rather than on individuals. The performance of certain organizational 12 components is often a primary determinant of, or surrogate for, the individual performance of segment management. However, the influence of organizational performance measures may be widespread. Hopwood [1972, 1974] identified a "contagion" effect in the use of accounting information. The suggested result is a "trickle-down" of the influence of measured organizational performance. Ridgway [1956] and Tiessen and Waterhouse [1983] suggest that organizational performance measures influence behaviors and attitudes even when the information is not intended to be used as a measure of individual performance. The following discussion indicates how early behavioral researchers questioned the practice of performance measurement and noted dysfunctional behavior associated with single numeric representations of performance.

Single Performance Measures Argyris [1952] reported a tendency of workers to manipulate production scheduling in order to obtain the desired effect on measured performance in spite of the potentially negative economic consequences to the firm. Blau [1955] observed similar behavior in a service oriented organization. Simon, Guetzkow, Kozmetsky, and Tyndall [1954] noticed that the use of standard cost as a single performance criterion often led to considerable inefficiencies. Employees spent time and effort on the 13 nonproductive practice of arguing the accuracy and appropriateness of the numbers. Apparently, a general lack of trust had resulted from a history of errors and problems related to the allocation of uncontrollable, or indirect costs. Studies in the Soviet Union [Granick, 1954; Berlinger, 1956; Horwitz, 1970] support the basic conclusion that single measures of performance are often accompanied by dysfunctional behavioral consequences. Relevance to the current study. When formal systems have single performance measures, managers will need to supplement the formal system with additional criteria in evaluating their subordinates in order to counteract the negative effects of the single measure.

Multiple and Composite Measures The use of multiple measures of performance (a number of single measures of different aspects of performance) is currently espoused in the normative literature [Horngren, 1982]. Closely related to the multiple measures approach is the use of a composite measure of performance, which is the result of mathematically combining a number of performance measures into a single score. A composite measure is a known function of multiple measures. Using either multiple measures or composite scores, it is argued in the normative literature that the dysfunctional consequences of single measures can be avoided [Horngren, 14 1982]. However, the added complexity may be accompanied by a different set of behavioral concerns. Ridgway [1956] hypothesized that when faced with multiple performance criteria (multiple measures), an individual may experience ambiguity. If a particular action has equally desirable results on all criteria, there is no ambiguity. Typically, however, there are conflicts, tradeoffs, and compromises. If the individual knows how the multiple measures will be reflected in some overall (composite) measure of performance, again there is no ambiguity. But, if the individual is unaware of how the multiple measures are to be combined, the employee will be forced to use judgment in deciding where to expend resources. Based on his review of the literature, Ridgway concluded: Quantitative performance measurements—whether single, multiple, or composite--are seen to have undesirable consequences for over-all organizational performance [p. 247]. Perhaps more importantly, Ridgway continues to note another very important behavioral concern: Even where performance measures are instituted purely for purposes of information, they are probably interpreted as definitions of the important aspects of that job or activity and hence have important implications for the motivation of behavior [p. 247]. Rosen and Schneck [1967] referred to Ridgway's summarization of the behavioral problem(s) associated with multiple measures of performance. They were unable to add 15 any additional sources of information pertinent to the use of either multiple or composite performance, but again concluded: Dysfunctions to the organization result from the use of single, multiple, and composite measures of performance. Single measures may not be properly selected or broad enough to coincide with the organization's goals. To be effective, multiple measures must be arranged in their degree of importance. Otherwise, in situations of ambiguity, employees may not focus on the one measure that gives the most desirable results for the organization. Composite measures also have potentially unfavorable effects, depending upon how management uses them [p. 14] . Relevance to the current study. Even multi­ dimensional measurements are inadequate representations of performance when the behavioral consequences are considered. The measurements can produce ambiguity and/or result in dysfunctional consequences to the organization whether or not they are presented as indicators of performance. Again, the implication is that informal information is needed to supplement the formal information.

Return on Investment (ROI) Primarily because of a widespread move toward organizational decentralization that began in the 1950s, a particular composite performance measure relating income to investment, return on investment (ROI), became popular with companies in the 1960s [Mauriel and Anthony, 1966]. A broad-based survey of United States businesses provided 16 Mauriel and Anthony the information necessary to reach their most significant complaint about practice:

. . . that generally accepted accounting principles, including any internal company rules and procedures intended to govern the reporting to outsiders of financial data on the firm as a whole, tend to influence very strongly the methods used in calculating an investment center's profit and investment base [p. 99].

They continue to explain how the accounting distortions are likely to produce incentives to favor the short-run operations over the long-run growth of the organization. The authors also consider the problems associated with the use of ROI in determining executive compensation. Mauriel and Anthony call for internal accounting procedures based on the internal needs of the organization.

Similarly, Rappaport [1978] argues for the design of incentive systems in such a manner as to avoid the short-term emphasis of the "simplistic rhetoric of accounting numbers" (ROI, earnings per share, or some other measure of profit). Reece and Cool [1978] replicated the Mauriel and Anthony study and found that the use of GAAP-based ROI had increased in use over a decade. In spite of a number of critical flaws, ROI had become deeply ingrained in the divisional performance evaluation process (only 3% of the companies with investment centers reported no influence of ROI on performance, and 74% of the companies surveyed reported having investment centers). Also, GAAP-based 17 reports were deeply ingrained as performance measures (40% of the companies reported no differences and/or adjustments). Relevance to the current study. Although widely criticized in the literature, ROI and GAAP-based reports strongly influence performance measurement and evaluation practices in organizations. The inadequacies of numeric representations of performance and the measurement error attributable to the influence of GAAP are reflected in ROI. Informal information is necessary to adjust for both.

Budget-Based Studies Budgeting activities are pervasive in business just as budget-based studies are abundant in the literature. Four of these, regarding individual performance evaluation and budgets, are particularly relevant to this study. Argyris [1953] recognized the control function of budgets, the pervasive influence of budgets in organizational decision making, and the use of budgets in individual performance evaluation: Budgets are accounting techniques designed to control costs through people. As such their impact is felt by everyone in the organization. They are continuously being brought into the picture when anyone is trying to determine, plan, and implement an organizational policy or practice. Moreover, budgets frequently serve as a basis for rewarding and penalizing those in the organization [p. 97; emphasis on original]. 18 Hopwood [1972, 1974] gathered empirical evidence regarding the use of accounting information in performance evaluation. He hypothesized that there were three distinct styles of using budgeted and actual cost information: budget constrained, profit conscious, and nonaccounting. The Ohio State University leadership behavior descriptive questionnaire (LBDQ) was used to measure various dimensions of managerial style. Hopwood concluded that a manager is more likely to be seen as using a budget constrained style of evaluation if that manager has a leadership style low in consideration and high in initiation of structure, particularly if a budget constrained style is used by the manager's superior (the contagion effect). Otley [1978] replicated and extended Hopwood's earlier study. Otley was particularly interested in the effects of such intervening variables as the interactions among style of budget use, budget accuracy, and profitability. He concluded that it is inappropriate to use differences in budget style to explain differences in performance because both depend upon the state of the economic environment, and pointed toward the need for: . . . a more contingent theory of budgetary control based on differences in organizational types, the environmental circumstances in which they operate, and the norms and values current both within the organization itself and within the society in which it is set [p. 146]. 19 Relevance to the current study In spite of potential dysfunctional consequences, budgets often constitute a large part of the formal performance evaluation support system. Individual variation in the use of budgetary information implies individual variation in the use of other information as well. If there are no other formal sources of performance related information, informal information will be sought to compensate for any perceived information inadequacies. In explaining individual variation in the use of accounting information, perceptions regarding the individual's superior are particularly important (the contagion effect), but there are a number of other potential influences. Accordingly, the relative use of formal and informal information in individual performance evaluation is contingent upon such factors as superior's leadership style, organizational type, environmental circumstance, and norms and values.

Contingency Theory Contingency theory has been applied to the study of a variety of organizational phenomena. Hunt [1984] discusses the contingency theory of organizational leadership, noting its dominance as a research paradigm since the late 1960s. Waterhouse and Tiessen [1978] suggest a contingency framework for research in management accounting systems. 20 Relevant to this study is the research concerning organizational structural contingencies. Ford and Slocum [1977] summarize the literature pertaining to the influence of size, technology, and environment on the structure of organizations. The authors measured four dimensions of organizational structure: complexity, centralization, administrative intensity, and formalization. Formalization was defined as: . . . the degree to which rules and procedures within a system are specified and/or adhered to. As a strategy of control, it emcompasses both the existence of rules or procedures, whether or not they are codified, and the degree of variation allowed therein [p. 562]. Formalization was found to be positively related to both technology (task routineness) and size (number of members), and negatively related to environment (perceived uncertainty).

Relevance to the current study Contingency theory suggests that organizational structures are dependent upon certain organizational and environmental variables. Information systems are organizational structures. Thus, formal and informal systems of performance related information may be contingent upon organizational and environmental variables. Also, performance evaluation is based on information from a variety of sources, formal and informal. Since 21 characteristics of both the formal and informal information systems are contingent upon organizational and environmental variables, the relative use of formal and

informal information is likely to vary due to organizational and environmental variables.

Agency Theory

Agency theorists such as Arrow [1963; 1964; 1974],

Jensen and Meckling [1976] , and Demski and Feltham [1978]

view organizations:

. . . simply as a focus for a complex process in which the conflicting objectives of individuals are brought into equilibrium within the framework of contracts. In this sense, the behavior of an organization is like the behavior of a market in that it is the outcome of a complex equilibrium seeking process [Tiessen and Waterhouse, 1983; p. 254]. The fundamental principal/agent relationships are based on contractual specifications of pay-off and risk sharing, and the monitoring of behaviors is recognized to be imperfect

and costly. Pay-off is determined in accordance with completely specified, contractual procedures for performance measurement. Alterations in the principal/agent relationship constitute renegotiation of

the employment contract. 22 Relevance to the current study Agency theory does not preclude individual performance evaluation nor the influence of informal information. Performance measurement and pay-off are contractually determined but the renegotiation process is not. The result of individual performance evaluation is manifest in the contract renegotiation process. Since renegotiation is not contractually specified, performance evaluation processes are by definition informal (non-contractual). While agency theory is not inconsistent with the study of information for performance evaluation, much of the relationship between formal and informal information goes beyond the hypothesized contractual relationships.

Markets and Hierarchies The markets and hierarchies paradigm "is a positive theory which seeks to explain the structure of markets and hierarchies, and the division of activity between markets and hierarchies" [Tiessen and Waterhouse, 1983; p. 258]. Based largely on the works of Williamson [1964, 1971, 1973, 1975], the markets and hierarchies paradigm emphasizes information, structure, and control. Generally, the theory suggests that hierarchies supplant markets when the market transaction and contract enforcement costs become too great. Regarding labor in organizations, hierarchies are an alternative to a set of separate and individual 23 contracts. The hierarchical form of organization includes an "internal labor market," membership in which (employment) constitutes acceptance of an incomplete social contract with the organization. Subordinate managers have local information not available to senior managers because they are closer to the operations of their subdivisions. This information about conditions and opportunities will be withheld (called "information impactedness") unless senior managers offer sufficient rewards in the form of opportunities and security. Further, subordinates must learn specialized skills, procedures, and language that have little value outside the specific organization. In order to induce the specialized learning, senior management must offer rewards and continuity. The communication of local information and the specialized learning become part of the performance history of the subordinate.

The primary purposes for ex post accounting measures in internal labor markets are "to assist in constructing performance histories and in settling disputes" [Tiessen and Waterhouse, 1983; p. 265]. While accounting numbers may be arbitrary and unfair: Other internal labor market customs and rules will simply adjust to compensate for the possibly undesirable direct effects of the accounting measures [Tiessen and Waterhouse, 1983, p. 265]. 24 Relevance to the current study Performance histories are not limited to a series of accounting measurements, and "internal labor market customs and rules" will require the consideration of informal information in performance related decisions. Formal performance information is included in the concept of sanctioned performance history hypothesized in the hierarchies and markets literature. While the terminology differs, the substance and intent are similar. The proportion of formal performance systems that are concerned with long-run performance instead of short-term performance measures is an empirical question already researched. Reece and Cool [1978] and other findings indicate that the majority of performance measures (circa 1978) are short-run in nature. Thus, the markets and hierarchies paradigm does provide a theory for why informal information is necessary in the performance evaluation process. Since performance measures are short-run in practice, informal information on long-run performance and local information sharing is necessary for performance evaluation. Further, since the observed performance measures are GAAP-based, they must be informally adjusted to make an equitable judgment on performance. 25 Managerial Performance Appraisal Performance appraisal, "which consists of the observation and evaluation of an employee's work behavior or the results of that behavior by someone," is the most frequently used method of measuring employee performance [Heneman, Schwab, Fossum, and Dyer, 1980; p. 116]. Periodic, all-purpose performance appraisal is a primary subject in both descriptive and normative managerial literature.

The normative literature addresses individual performance in organizations from two approaches. First, writers such as Landy and Farr [1983] and Heneman, Schwab, Fossum, and Dyer [1980], emphasize measurement. Others, typified by Lawler [1981] and Kane and Lawler [1979], emphasize the subjective nature of the process. To the former, periodic performance appraisal is the most common method of performance measurement. To the later, periodic performance appraisal serves a variety of purposes, primarily developmental and reward allocation. Some writers suggest that development and reward allocation are incompatible functions [Kane and Lawler, 1979], while others suggest that the tv;o functions may be inseparable [Marshall, 1978]. Of particular relevance to this study are two surveys of managerial performance appraisal practices and techniques. A 1977 report by The Conference Board [Lazer 26 and Wikstrom, 1977] addressed current managerial performance appraisal practices and existing performance appraisal information systems. The study indicated that managers were appraised annually (90%) and appraised by their immediate superior (95%). A variety of techniques was used to evaluate performance, the most common being objective setting or MBO (management by objectives), ratings, critical incident, checklists, and rankings or comparisons. Further, 71% of the companies were found to have formal appraisal systems for mid-to-low-level management. Eight general categories of stated objectives characterized the formal systems (presented in decreasing frequency of occurrence): Management development Performance measurement Performance improvement Compensation administration Identifying potential Feedback Manpower planning Communications [p. 11] However, the actual uses of the performance appraisal information were found to be quite different. The responses were summarized into six groups (decreasing frequency):

Performance feedback Compensation administration Promotion decisions Identifying management manpower needs Manpower planning Validation of selection procedures [p. 11] 27 A third ordering was suggested by a follow-up study of the priorities associated with each of the six groups of uses of performance appraisal (decreasing priority): Compensation administration Performance feedback Identifying management development needs Promotion decisions Manpower planning Validation of selection procedures [p. 11] The discrepancy between the stated objectives and the actual use of the formal performance appraisal information was attributed to dissatisfaction with the formal system. A number of problems with the formal system was suggested, with "conflicting multiple uses" being the most prevalent. Even though the subjects seemed to perceive performance appraisal for compensation adjustment purposes to differ from performance appraisal for developmental purposes, the data indicate that more than three-fourths of the companies used the same appraisals for both.

Finally, the study found that "the performance of managers not currently covered by a formal performance appraisal system is still evaluated," citing a number of subjects' descriptions of alternative (informal) appraisal techniques: Personal observation by the department head - nothing in writing Our appraisal of managers consists of periodic visits with the supervisor, generally at salary evaluation time . . .

Seat of the pants 28 Since our management group is fairly small, we still enjoy an intimate set of supervisor-subordinate relations. Performance evaluation, therefore, is an ongoing continuous activity rather than a fixed event occurring once a year By their immediate supervisors, in whatever way the supervisor considers appropriate Unwritten, mental appraisal Observation by immediate supervisor, and confirmed by next highest supervisor. This is not usually written or even communicated . . . the "no news is good news" syndrome Function of individual's manager's philosophy and techniques What the boss's "tummy" tells him [Lazer and Wikstrom, 1977; page 23; subjects' descriptions deleted] The findings reported by The Conference Board were largely supported by a more recent report of the American Management Associations (AMA) [Eichel and Bender, 1984]. Annual evaluations remained prevalent, particularly when related to compensation adjustment. Goal setting, essays, and critical incidents, respectively, continued to be the three most commonly used techniques of performance appraisal, but two new techniques, graphic ratings and BARS (behaviorally anchored rating scales) were evident in practice. Seven primary uses for performance evaluation were identified (decreasing frequencies): Compensation Counselling Training & development Promotion 29 Manpower planning Retention/discharge Validation of selection technique [p. 12] Again, the authors suggest that performance evaluation for salary administration purposes differs from performance evaluation for improvement and developmental purposes. The AMA study did not specifically address sources of information used in performance evaluation but did note that the current legal environment required the use of a formal, documented performance appraisal system emphasizing quantification, replication, and standardization.

Relevance to the current study Normative literature regarding performance measurement, evaluation, and appraisal is abundant and diverse. Both of the descriptive studies, however, suggest that performance evaluation (appraisal) for compensation related purposes is not the same as performance evaluation for training and developmental purposes. Also, Lazer and Wikstrom noticed a discrepancy between the formally stated objectives of performance appraisal system and the actual use of the information. Inadequacies of the formal information are the identified causes of the discrepancy; use of informal information to compensate for the inadequacies is a likely result. 30 Informal Information Four studies directly addressing informal information in organizations have been identified. Clancy and Collins [1977, 1979] report the results of a two-stage study (case and questionnaire) of informal accounting information systems. They defined a formal accounting information system as: . . . that which collects, stores, analyzes and reports events, typically of an economic and quantitative nature . . . (and) normally legitimized by top management [Clancy and Collins, 1979, pp. 21-22]. Informal accounting information systems were "non-legitimized" or personally maintained. They found that about 85% of the sampled managers kept an informal system of records and, while the informal records were important in control and evaluation, the records were considered less important than the formal reports. The questionnaire used by Clancy and Collins solicited subjects' perceptions about a number of characteristics of both the formal and informal information systems, such as accuracy, understanding, importance, and level of detail. Using the questionnaire data, Clancy and Collins determined that the subjects perceived formal and informal information systems as distinct and separate, and identified a number of relevant characteristics. However, they were not able to support their a priori expectations that the existence of informal information systems would be correlated with 31 certain formal system characteristics. Generally, Clancy and Collins conclude that informal a^ccounting systems are "a useful_and necessary adjunct to formal_systems rather than an unnecessary dissipation of resources." Even though the informal records were less important, both systems were perceived to be useful and desirable by the subjects. Collins and Johnson [1986] report the results of an exploratory case study of organizational communication, noting the importance of general, informal communication activity. They suggest that general, informal communications provide a "linking" function between j organizational problems and solutions. Based on series of interviews with individuals in public accounting firms, Dirsmith and Covaleski [1985] observed that "[all] individuals concurred that informal communication networks were much in evidence" [p. 154; emphasis on original], and that "[the] most mentioned theme of informal communications was compensation" [p. 155] . However, they disagreed with the conclusions of Clancy and Collins [1979] regarding the complementarity of formal and informal information systems. Instead they attribute aberrant behavior to inaccuracies with, and perceptions about, the informal information. However, the disagreement may be one of semantics. Dirsmith and Covaleski suggest a third "category" of information--nonformal. Nonformal communications are seen to be distinct in that they are 32 associated with the formally recognized, "sanctioned" practice of mentoring. What may have been "nonformal" to Dirsmith and Covaleski may well have been "informal" to Clancy and Collins. Dirsmith and Covaleski's conclusions are also inconsistent with the more recent findings of Collins and Johnson [1986] regarding the importance of informal communication activity. But again, the apparent discrepancy is explainable. Collins and Johnson studied a significantly less mature, formalized entity than the CPA firms studied by Dirsmith and Covaleski. Accordingly, the extent to which the formal performance evaluation support system had been developed differed greatly.

Relevance to the current study Researchers agree as to the pervasiveness of informal information in organizations but disagree about its effects. Informal information systems have been inferred to complement formal information systems, and informal communication activity has been demonstrated to be beneficial to organizations. However, informal i communications have also been shown to be dysfunctional. While none of the studies of informal information activity directly address performance evaluation, their inconsistent conclusions suggest situational variability and semantic difficulty in the study of informal information. 33 Summary The evaluation of individual performance plays an important role in organizations. Performance evaluation influences goal setting and provides feedback regarding goal-directed behavior. However, the relationships among goals, performance, and feedback are situational.

Early studies on performance measures (single, multiple, and composite) conclude that measures of various aspects of organizational activity influence the behavior of individuals even in cases in which the measures are not intended to do so. Further, early budget studies indicate the importance of budgets to individuals in organizations, particularly because of their frequent use in pay and promotion decision making. Also suggested is that some effects "filter down" the organization thereby influencing the behaviors of lower management. Potentially, the dysfunctional consequences of organizational performance measurement and the influences of budgeting will be evident throughout the organization. Periodic performance appraisals are pervasive. Performance appraisals are used for a variety of purposes, but the two most important and most frequent uses of appraisals are compensation administration and feedback (including counseling and development). In most formal systems, and according to a great deal of the normative literature, a single appraisal is intended to serve many 34 purposes. However, research has suggested that performance appraisal for the purpose of compensation adjustment should not be the same thing as performance appraisal for training and developmental purposes. Since periodic performance appraisals are incapable of supporting both salary administration and training and development, superiors must use additional information in at least one of the processes. From a total labor force perspective, the markets and hierarchies literature recognizes the potential for dysfunctional behavioral consequences of the use of accounting measures alone because they are short-run in nature, and suggests the role of informal information in compensating for formal system inadequacies. This complementary relationship between formal and informal information is supported by Clancy and Collins [1979] and Collins and Johnson [1986] , but disputed in Dirsmith and Covaleski [1985]. Individual performance evaluation is influenced by a number of situational and individual factors. Accordingly, the relative use of formal and informal information in performance evaluation is likely to be related to, or contingent upon, a number of situational and individual factors, or explanatory variables of interest. In the following chapter, the dependent variable (relative use of formal and informal information in individual performance 35 evaluation) and the explanatory variables of interest are discussed, and illustrations of the expected relationships among the variables are provided. CHAPTER III DISCUSSION OF VARIABLES AND RELATIONSHIPS MODEL DEVELOPMENT

In this chapter, the research perspective is explained and the variables of interest are discussed. Then, hypotheses are stated in order to specify the a. priori relationships among the variables, and a research model is provided to illustrate the hypothesized relationships. In the following chapter, the research methodology is explained, and data gathering and analysis are discussed.

Theoretical Perspective Performance information is relied upon in making judgments about an individual's performance, and performance judgments as a summative evaluation are a primary determinant of performance related decisions [Jiambalvo, Watson, and Baumler, 1983; Howell, 1976; Zedeck and Kafry, 1977]. Therefore, performance evaluation is an intervening variable between the relevant information and performance-related decisions, such as pay, promotion, and termination. Figure 3.1 (following page) illustrates these basic relationships. 36 37

Performance Performance Pay, Promotion, or

Informati on Evaluati on Termination Decision

Figure 3.1: Preliminary Theoretical Model 38 One characteristic of the relationship between performance information and performance evaluation is the relative use of formal and informal information (RUFI). Variation in RUFI may evidence moderating effects of a number of factors on the relationship betv/een information and evaluation. From an individual decision-maker's perspective, RUFI may be partially determined by that individual's attitudes toward the information. Variance in RUFI may be partially attributable to variation in individuals' attitudes toward the information (ATTITUDES). With the addition of the moderating variable (ATTITUDES) and in illustration of the variable of interest (RUFI), Figure 3.2 (following page) depicts the theoretical model. Since the design of jobs influences the approach and content of performance evaluation, variation in RUFI may also be attributable to variation in the nature and content of the individuals' organizational function. The nature and content of jobs vary both within and among organizations. Organizational size, technology, and environment are likely to influence the design of jobs from organization to organization. Delineation of responsibilities within organizations (sales, production, support, etc.) is likely to influence the design of jobs within organizations. Of primary concern in this study, however, are the individually-oriented factors that influence RUFI. Thus, the models presented in this chapter 39

Performance Performance Pay, Promotion, or RUFI •^ Informati on A Evaluati on Termination Decision

Attitudes Toward Information

Figure 3.2: Theoretical Model 40 do not depict the influence of variation in job design on RUFI, and the sampling procedures discussed in the following chapter were designed to control for both interorganizational and intraorganizational variation in the nature of the individuals' jobs. In this study, attitudes toward the information (and other individually-oriented factors) are expected to moderate the relationship between information and evaluation. The relative use of formal and informal information (RUFI) is descriptive of the relationship between information and evaluation, and variation in RUFI indicative of moderating effects on that relationship. Finally, the results of performance evaluation are presumed to be manifest in pay, promotion, and termination decisions. Under the hierarchies and markets theory [Tiessen and Waterhouse, 1983] , a performance history is a necessary part of an "internal labor market" that encourages subordinates to reveal private information. In a dynamic setting, the results of performance decisions become part of the performance history of the employee. Thus, the relationships illustrated in the theoretical models may not be unidirectional as indicated. The static, unidirectional models are presented in order to emphasize the primary 41 theoretical relationships. Of primary concern in this study is the formal/informal classification, regardless of the current/historical nature of the information.

Potential Explanatory Variables In addition to ATTITUDES, there are a number of measurable personality traits and other individually- oriented variables with the potential of explaining variation in RUFI. Possibilities include perceived role stress; leadership style; the "needs" variables of power, achievement, and affiliation; Jungian type; Machiavellianism; authoritarianism; and demographic variables such as age, tenure, and sex. Included in this study, however, are only those variables for which an a priori statement of casual relationship with RUFI could be provided. Previous discussions justified the inclusion of ATTITUDES as an explanatory variable. The following discussion of the research perspective adopted explains why role stress and superiors' leadership style are included. One additional variable, locus of control, is included since an extensive theoretical articulation and a pervasive empirical base support a priori specification of the relationships among locus of control and the other research constructs of interest. 42 Research Perspective Some researchers (see Collins and Clancy [1980]; * Collins [1982]; Collins, Seller, and Clancy [1984]; Collins and Johnson [1986]; Collins, Munter, and Finn [1983]) have adopted the role perspective suggested by Katz and Kahn [1967], viewing organizations as dynamic, interactive systems capable of being described in terms of roles and norms. Roles and norms are closely related concepts; the former referring to a sets of behaviors and the latter representing limitations, or expectations about the former. Collins and Clancy [1980] note that "roles exist in relationship to other roles," [p. 1] and recognize the particular importance of the role-related expectations of "salient" others [p. 2]. In a business setting, an individual's superior is likely to be a particularly salient other. Thus, both perceived role stress and perceived leadership style (superiors') are likely to be useful explainers of attitudes and behaviors of individuals in organizations. The influence of extraorganizational factors on individual behavior (the external environment) is not inconsistent with the research perspective. Norms and roles are the result of both internal and external influences. External influence is evident in the subsystems within an organization [Katz and Kahn, 1967; Collins and Clancy, 1980], and therefore is reflected in 43 individuals' attitudes toward those systems. Collins [1982, p. 1] suggests that certain information-providing subsystems "are useful in communicating role expectations." Thus, additional external influence is evident in individuals' role-related perceptions. Finally, organizational attributes such as size, structure, and technology also evidence external influence. To the extent that individuals' perceptions and attitudes vary among organizations, organizational variables such as size, structure, and technology, are potentially useful explanatory variables. Organizational variables are not useful, however, in explaining variation within organizations. This study focuses on RUFI and on individually- oriented factors that influence RUFI. Subjects' attitudes and perceptions constitute the primary empirical evidence. Also, a role perspective is adopted both in discussing information systems in organizations and in studying the attitudes of individuals. Thus, the role related variables of role stress and perceived superiors' leadership style are included as explanatory variables. Finally, a personality variable, locus of control is of interest largely because of the vast empirical history of the construct and the intuitive appeal of locus of control as an explanatory variable. Beginning with the dependent 44 variable, RUFI, discussions of each of the research variables of interest follow.

The Relative Use of Formal and Informal Information As previously stated, there are two primary research objectives: 1. To examine the extent to which informal information is relied upon relative to formal information (RUFI) in performance-related decision making, and 2. To study the relationships among a number of a. priori explanatory variables and RUFI. The dependent variable of interest, THE RELATIVE USE OF FORMAL AND INFORMAL INFORMATION (RUFI), is operationally defined as the extent to which formal information is perceived to be relied upon relative to informal information in performance-related decision-making in organizations. This variable directly addresses the first research objective; explained variation in RUFI addresses the second. RUFI is of particular relevance to anformation systems analysis and design. In fact, RUFI might be considered as a measure of the influence of the formal, or official, system of performance information. Heavy reliance on formal information (relative to informal) suggests that an 45 organization's formal system influences managers' judgments greatly. Conversely, relatively heavy reliance on informal information suggests that the formal system has less influence. Positive and normative issues arise: To what extent i_s the formal information relied upon (relative to informal) and what factors explain the variation in use; and to what extent should the formal information be relied upon (relative to informal) and how can the reliance be influenced? This study addresses the subject from a positive research perspective. In order to provide comparability, a definition of the term "informal" similar to that applied by Clancy and Collins [1979] is used in this study. Accordingly, informal information is defined by default, as that which is not formal. Formal information is that information produced or required by official, "sanctioned" information systems. All other information is informal. A large part of the variation in RUFI is expected to be attributable to attitudes toward both the formal (official) information and the informal (other) information relied upon.

Attitudes Toward Formal and Informal Information Perhaps most relevant to the designers of information systems are the relationships among attitudes toward formal and informal information and RUFI. Descriptive conclusions 46 and normative suggestions are likely to concern certain attributes of the information, such as timeliness, completeness, accuracy or confidentiality. Clancy and Collins [1979] suggest several reasons for the informal collection of accounting information, many of which refer to formal system inadequacies: 1. Limitations of the formal information system. a. Reports not tailored to individual user needs b. Untimely (tardy) reporting c. Lack of data reliability iX d. Inappropriate level of data aggregation or grouping regarding individual user needs 2. Limitations of the organizational environment. a. Lack of trust between report users and preparers b. The need for a defense mechanism in their performance evaluation involving formal system data ("covering tracks") c. A perceived need on the part of managers for information confidentiality v d. Failure of formal system to measure personalized manager goals e. Informal accounting records may be helpful in learning (memorizing) currently important operational information [pp. 23-24]. While certain characteristics or attributes may be more important than others, individuals are likely to have a general attitude toward formal and informal information. Perceptions regarding certain characteristics of the information are indicative of such a general attitude. As indicated in the following descriptive categories, there may be a wide range of general attitudes toward informal performance information: 47 1. Highly negative: Informal information used in performance evaluation is inherently bad. If the information was any good, it could easily be included in the formal system. 2. Mildly negative: Informal information is a necessary evil. Even the most detailed, bureaucratic formal system will not be able to measure all the significant aspects of a manager's performance. 3. Mildly positive: Informal information in performance evaluation is necessary for the exercise of good management. Good and poor performance can be hidden in the details of formal systems because the formal system cannot consider all significant aspects of performance and the unique facts and circumstances of each manager. 4. Highly positive: Informal information is most often an accurate indicator of performance. Informal information is critical for the exercise of good supervision of employees. Without informal information, a manager is blinded by the formal reports. 48 Attitudes toward the formal system may vary as well:

1- Highly negative: Formal performance measurement systems are highly bureaucratic, satisficing procedures with dysfunctional consequences. 2. Mildly negative: Formal performance measurement systems do tell us something about performance, but are far from complete. 3- Mildly positive: Formal systems are necessary for adequate control, but some supplementary information is needed. 4. Highly positive: Formal performance measurement is a useful exercise in good management, and need not be supplemented with additional information. Perceptions regarding such attributes as completeness, accuracy, usefulness, understandability, and confidentiality of both formal and informal information reflect individuals' general attitudes toward each. Thus, the research construct, ATTITUDES, consists of two dimensions—attitudes toward formal information and attitudes toward informal information. Variation in ATTITUDES is expected to explain a significant part of the variation in RUFI. Generally, relatively positive attitudes toward formal (informal) information is expected to result in relatively greater reliance on formal (informal) information. 49 Locus of Control

The concept of locus of control refers to individuals' attributions regarding the control over events. Internals attribute control to themselves, whereas externals attribute control to outside forces. Spector [1982] summarized the empirical research as follows:

. . . locus of control is related to motivation, effort, performance, satisfaction, perception of the job, compliance with authority, and supervisory style [p. 482].

Brownell [1979; 1981; 1982b] studied locus of control as a moderator of the relationship between participation in budgeting and organizational effectiveness (performance). Brownell justified the treatment of locus of control as a personality variable "simply as a function of the sheer weight of evidence concerning the wide variety of situations across which predictions regarding locus of control have been confirmed" [1979; p. 41]. In general, budgetary participation was found to have a positive effect on the performance of internals and a negative effect on the performance of externals [1981]. Since the budget is often an important component related to performance evaluation, the findings of Brownell suggest that locus of control is relevant to this study as well.

Licata, Strawser, and Welker [1986] report the results of an experiment that supports their hypothesis that internal managers allow subordinates greater participation 50 in budgeting than do external managers. In another experiment, Goodstadt and Hjelle [1973] found internals exhibiting a personal, persuasive style of supervision and externals exhibiting a coercive style. Both experiments suggest that internals use a more flexible, subordinate oriented managerial style. Implied is the use of a wider range of information in performance related decision making by internals than by externals. Licata et al. suggest that: It is conceivable that a supervisor involved in budget preparation may have a choice as to the amount of influence he will allow the subordinate to have on his determination of the budget and, further, that locus of control may affect the superior's behavior . . . biasing either toward or away from the subordinate's performance expectations [pg. 113]. The logical extension is that locus of control may affect the superior's behavior regarding the evaluation of the subordinate's performance as well. In explaining the relative use of formal and informal information systems, LOCUS OF CONTROL may be significant not just because of relationships with other performance related variables. In a laboratory experiment, Harvey, Barnes, Sperry, and Harris [1974] found that internals perceive more alternatives in a choice situation than do externals. Accordingly, informal information systems are more likely to be considered viable alternatives, or supplements to the formal system by internals than by 51 externals. Conversely, externals may rely more on formal systems than do internals because they are relatively less able to perceive alternatives and are more likely to accept what information is placed before them by the formal system. Also, internals have been shown to exhibit less conformity than externals [Crowne and Liverant, 1963].

Again, internals would be expected to rely relatively less on formal information than do externals, particularly if the individuals perceive pressure to conform to the formal system.

Generally, externals are expected to have more favorable attitudes toward, and rely relatively more on formal information, whereas internals are expected to have more favorable attitudes toward, and rely relatively more on informal information systems.

Role Stress Role stress is best defined as the strain that results from one or both of two situations: role conflict and role ambiguity [Kahn, Wolfe, Quinn, Snoek, and Rosenthal, 1964]. Based on their review of the literature. Van Sell, Brief, and Schuler [1981] defined role conflict as "incongruity of expectations associated with a role" [p. 44], but were unable to provide a specific definition for role ambiguity, noting the lack of an elaborate conceptualization in the literature (see also McGrath [1976] and Sarbin and Allen 52 [1968]). The following forms of role ambiguity are suggested by Van Sell et al:

(a) information is unclear regarding which potential role expectation—A, B, or C—should be performed;

(b) it is understood that expectation A should be met, but information is unclear regarding what behavior will in fact yield A;

(c) the consequences of behavior A are unclear [p. 44] . Rizzo, House, and Lirtzman [1970] developed a frequently used role stress measurement instrument and provided the initial support for interpretation of the scale's results along the two dimensions of conflict and ambiguity. High construct validity and continued use of the scale are supported by a psychometric evaluation reported by Schuler, Aldag, and Brief [1977] and in the review and discussion of Van Sell, Brief, and Schuler [1981]. However, the later are careful to note high correlation between the two constructs and to suggest bi-directional causation. More recently, Howell and Wilcox [1986], caution against separate interpretation of the two dimensions of the scale on the basis of another psychometric analysis. In this study, role stress is of concern as an explanatory variable. Thus, the composition of stress by dimension is secondary since the type, or cause, of stress is not of primary concern. 53 Role stress has been studied in relation to a variety of other research constructs. It has been hypothesized to be related to budgetary attitudes [Collins, 1978; Collins and Seller, 1981; Collins, Seller, and Clancy, 1984], satisfaction [Sapp and Seller, 1980], leadership style [Rizzo, House, and Lirtzman, 1970; Collins, Anderson, and White; 1984], employee turnover [Ivancevich and Donnelly, 1975; Sorensen and Sorensen, 1974; Lyons, 1976], performance [Greene, 1972; Brief and Aldag, 1976; Haas, 1964] , and perhaps most significantly to job satisfaction (see Van Sell, Brief, and Schuler, [1981] for a review).

The hypothesized psychological and physiological effects of stress on individuals are diverse. From a psychological perspective, stress is often assumed to result in fixed, or dominant (well-learned) response, but the nature of this dominant response is situational, as noted by Zajonc [1980] :

Stress conditions often elicit fixed response patterns, and different stress conditions elicit different responses in different species (e.g., quails freeze in the presence of a hawk, and rats attack each other when receiving electric shock) [p. 54] . The general theme of the psychological literature suggests that individuals under stress resort to what is well-known, established, and "easy." Thus, an individual under stress is likely to use the formal information system since it is known, supported, and documented. In general, 54 high (low) ROLE STRESS is expected to influence both ATTITUDES and RUFI in favor of formal (informal) information.

Leadership Style A great deal of leadership research is evident in the social psychological literature (reviewed by Hosking [1981] and Chemers [1983]). Much of the leadership research focuses on the behaviors of the leader [Chemers, 1983; p. 10]. One extensive leader behavior research program was conducted at the Ohio State University and produced the Leadership Behavior Description Questionnaire (LBDQ), a 150-item scale to measure leader behavior [Hemphill, 1950; Hemphill and Coons, 1957; Stogdill, 1963]. Halpin and Winer [1957] used factor analytic techniques to identify two primary factors, or dimensions, of leader behavior reflected in the LBDQ data: consideration and initiation of structure. Consideration is characterized by mutual trust and respect, warmth, and open communications. Initiation of structure refers to task directed organizational and structural activities. These two dimensions of leader behavior are conceptually similar to the employee oriented and production oriented supervisory styles identified by Kahn [1951] and Katz and Kahn [1966] , the socioeconomic specialist and task 55 specialist referred to by Bales and Slater [1945], and concern for people and concern for production supported by Blake and Mouton, [1964]. Much of the research in organizations concerning leadership utilizes the structure and consideration dimensions [DeCoster and Fertakis, 1968; Revsine, 1970; Hopwood, 1972, 1974; Otley, 1978; Collins, Anderson, and White, 1984]. Of particular relevance to this research are studies of leadership style and budgeting practices [Hopwood, 1972, 1974; Otley, 1978; and Brownell, 1982a and 1983]. Generally, Hopwood was able to support the contention that a budget-constrained leadership style leads to job related tension, and suggested that the increase in tension has dysfunctional consequences. Otley's attempt to replicate Hopwood's work resulted in apparently conflicting data, suggesting a positive association between performance and a budget-related leadership style. Finally, Brownell extended the previous studies, noting that: . . . a budget-focused leadership style is most effective under conditions of high participation, but is ineffective where participation is low [p. 13] . Thus, relationships between leadership style and subordinate performance are widely recognized, but the nature of the relationship and the influence of situational and individual variables remain unexplored. Nonetheless, it is logical to expect the superior's leadership style to be significantly related to the subordinate's performance 56 evaluation practices. The leadership style of the superior serves to communicate role expectations to the subordinate. Also, the performance evaluation practices of the subordinate are a part of the subordinate's performance. Therefore, the superior has a direct influence on the performance evaluation practices of the subordinate through evaluation of the subordinate's performance evaluation "performance" and an indirect influence on the subordinate's performance evaluation practices through the role expectations communicated through the superior's leadership behavior.

Individuals who perceive their superior to be high on initiation of structure are expected to be influenced toward the more structured, formal system. Further, the contagion effect [Hopwood, 1972] implies that the subordinate is likely to exhibit the superior's leadership style, again implying a relatively greater reliance on the structured, formal system when the superior is highly structured in leadership style. Conversely, individuals who perceive their superior to be highly considerate are more likely to perceive the ability to deviate from the formal system without retribution. As such, the individuals are more likely to use informal information than in- situations where the superior is less considerate toward individual needs. Thus, high (low) structure is expected to influence both ATTITUDES and RUFI toward formal 57 (informal) information, whereas high (low) consideration is expected to influence both ATTITUDES and RUFI toward informal (formal) information.

Other Relationships Among Explanatory Variables

Previous discussions have focused on the relationships among ATTITUDES and RUFI and each of the individually oriented explanatory variables. Additional relationships among the explanatory variables include: 1) LOCUS OF CONTROL and ROLE STRESS, 2) LOCUS OF CONTROL and LEADERSHIP STYLE, 3) and ROLE STRESS and LEADERSHIP STYLE.

"Strictly speaking, locus of control is more popularly conceived as being a relatively stable characteristic which endures over time and across situations" [Brownell, 1979; p. 36, note 27]. As such, LOCUS OF CONTROL may not be influenced by the other variables of interest, but is likely to influence perceptions of both ROLE STRESS and LEADERSHIP STYLE. Further, the role perspective adopted suggests that superiors' LEADERSHIP STYLE may influence perceived ROLE STRESS.

LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE are of interest in this study on the presumption that each influences ATTITUDES and RUFI. The determinants, or causes, of LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP

STYLE are beyond the scope of the research, but the fact 58 that the three are related is relevant. Relationships among LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE are recognized in order to portray a more accurate research model and to facilitate statistical analysis. Exclusion of these "other" relationships in data analysis could lead to distorted or incorrect conclusions involving ATTITUDES and RUFI.

Variables of Interest: Summary Of primary concern are the direct relationships between the dependent variable, RUFI, and each of the four individually-oriented explanatory variables: ATTITUDES, LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE. RUFI is expected to be influenced toward informal information by relatively favorable ATTITUDES toward informal information, relatively more internally-oriented individuals regarding LOCUS OF CONTROL, low levels of ROLE STRESS, and supervisors exhibiting highly considerate, low structure LEADERSHIP STYLE. RUFI is expected to be influenced toward formal information by relatively favorable ATTITUDES toward formal information, relatively more externally-oriented individuals regarding LOCUS OF CONTROL, high levels of ROLE STRESS, and supervisors exhibiting highly structured, low consideration LEADERSHIP STYLE.

There are a number of relationships among the explanatory variables with the potential of indirectly 59 influencing RUFI. ATTITUDES may be affected by the three other explanatory variables. In fact, the influence of the explanatory (and other) variables on RUFI may be primarily "through" ATTITUDES. Finally, the relationships among LEADERSHIP STYLE, ROLE STRESS, and LOCUS OF CONTROL must be recognized so that the direct and indirect effects of the explanatory variables are not distorted.

Hypotheses The following research hypotheses refer to the independent, or predictor variables, and are based primarily on the previous discussions. Five hypotheses are needed to specify the direct relationships between the predictor variables and RUFI because two dimensions of LEADERSHIP STYLE are of interest. Stated in the alternate form, the five hypotheses follow:

HI: When making performance related decisions, relatively favorable attitudes toward informal (formal) information will be associated with relatively greater reliance on informal (formal) information. H2: Individuals who are relatively strong

internals rely relatively more on informal

information when making performance related

decisions. 60 H3: Individuals in a high state of role stress rely relatively less on informal information when making performance related decisions. H4: Individuals who perceive their superior to be relatively high in initiating structure rely relatively less on informal information when making performance related decisions. H5: Individuals who perceive their superior to be relatively high in consideration rely relatively more on informal information when making performance related decisions. There are four additional hypotheses that pertain to indirect relationships between the predictor variables and RUFI. Again in the alternate form, the hypothesized relationships among the predictor variables and ATTITUDES follow: H6: Individuals who are relatively strong internals are likely to have relatively more favorable attitudes toward informal information. H7: Individuals in a relatively low state of role stress are likely to have relatively more positive attitudes toward informal information. H8: Individuals who perceive their superior to be relatively high in initiation of 61 structure are likely to have relatively more positive attitudes toward formal information.

H9: Individuals who perceive their superior to be relatively high in consideration are likely to have relatively more positive attitudes toward informal information.

Although not of interest as hypotheses, additional relationships among the explanatory variables are recognized. In similar positive, or alternate form, there are three "assumed" relationships:

Rl: Locus of control and role stress are related. R2: Locus of control and superiors' leadership style are related. R3: Role stress and superiors' leadership style are related.

The Research Model In the conceptual model of the relationships between performance information, performance evaluation, and performance related decisions (pay, promotion, and termination), attitudes toward the informal information were hypothesized to have a moderating effect on the relationship between performance information and performance evaluation (see Figure 3.2: Theoretical Model, page 39). Previous discussions have supported similar moderating effects of LOCUS OF CONTROL, ROLE STRESS, and 62 LEADERSHIP STYLE, and have suggested some additional relationships among the variables. The direct relationships between RUFI and each of the four explanatory variables and the relationships between ATTITUDES and each of the three other explanatory variables are stated as hypotheses. The assumed relationships summarize additional relationships among the explanatory variables. Accordingly, the research model is now complete and illustrated as Figure 3.3 (following page). Straight lines between constructs indicate hypothesized relationships, whereas curved lives represent assumed relationships. 63

ROLE STRESS

LOCUS OF

CONTROL

RUFI

LEADERSHIP

STYLE

Figure 3.3: Research Model CHAPTER IV

RESEARCH METHODOLOGY

The purposes of this chapter are to: 1) explain the research methodology, describe the research subjects, and discuss the research instrument; and 2) provide a brief description of the statistical technique applied. Particular emphasis is placed on the development and measurement of the dependent variable—RUFI.

A Two-Phase Field Study The first phase of the study consisted of a series of interviews to develop the research instrument. The interview approach was desirable because of the "richness" of information available, and to promote internal and external validity. The second phase of the study involved pretesting of the instrument to a sub-sample of managers and administration of the questionnaire. The empirical data for statistical analysis were gathered in phase two. Both phases involved a non-laboratory setting and neither phase involved the manipulation of variables. Accordingly the research is appropriately classified as a field study:

64 65 ... ex post facto scientific inquiries aimed at discovering the relations and interactions among sociological, psychological, and educational variables in real social structures [Kerlinger, 1973; p. 405].

Phase one of the study was exploratory in nature whereas phase two was hypothesis-testing.

Phase One: Development of the Instrument Performance evaluation was not directly observable for research purposes because of both the confidential and legal nature of employment records. The proposed explanatory variables involved individuals' attitudes and perceptions. Thus, the need for confidential, individual participation suggested the appropriateness of a questionnaire as the primary data source.

Measurement of RUFI and ATTITUDES Standardized measures were available for each of the independent variables in the research model except ATTITUDES. The dependent variable (RUFI) and the independent variable ATTITUDES are unique to this study and had to be developed. Early development of the instrument included a number of interviews with a variety of subjects. The interviews consisted of a series of open-ended questions regarding the use of information in pay and promotion decisions, desirable and undesirable attributes of that information, and descriptions of the source(s) of 66 the data. A general schedule for the early interviews is presented as Appendix A. Participants in the developmental interviews were of diverse backgrounds and represented a variety of supervisory roles. Included were a general manager and a personnel manager of a national retail organization, an operations manager of an energy service company, a commercial-lending officer, a public school superintendent, and a number of university professors and graduate students with various supervisory experience. Each of the interview subjects currently or previously played a significant role in the determination of merit pay increases, promotions, and terminations of subordinates.

Three semantic issues became evident during the initial interviews. First, the subjects tended to interpret "performance evaluation" as the periodic coaching and development exercise required (and documented) by the formal system rather than as the "summative evaluation" of interest in this study. The evaluations were done at varying time intervals and provided part of the information used in performance-related decision making. Thus, the subjects perceived "performance evaluation" to mean what the normative managerial literature refers to as "performance appraisal," and were consistent with the previously summarized surveys of current managerial practice regarding differences in performance evaluation 67 for coaching purposes and performance evaluation for pay and promotion decisions. Since the later was of primary concern in this study, the ATTITUDES and RUFI sections of the questionnaire referred to pay, promotion, and termination decisions. Questions regarding periodic performance evaluation (appraisal) were included, but the responses were expected to vary significantly from those regarding pay, promotion, and termination decisions since the two were treated differently by interviewees. The second semantic issue identified in the early interviews concerned the terms formal and informal. Neither term was understood by the subjects. All subjects, however, could easily define or describe the "official" system, and had no problem describing "official information." Further, all subjects were able to describe "other" informational influences on performance appraisals and pay, promotion, and termination decisions. Given the "official" vs "other" terminology, the subjects were able to discuss their attitudes toward each, frequently mentioning such attributes as confidentiality, completeness, and accuracy. The subjects described a variety of "other" (i.e., informal) informational influences and systems used by themselves and other organizational members. The descriptions ranged from "opinions of others" to elaborately developed, fully documented measurement systems. Thus, in the 68 questionnaire, "official" and "other" were used to represent "formal" and "informal," respectively, and the ATTITUDES questions addressed such attributes as confidentiality, completeness, accuracy, and timeliness.

The third issue pertained to differences in the authority of the manager in performance-related decision making. Some of those interviewed indicated that they could not actually make pay, promotion, or termination decisions but that they did have the ability to significantly influence the decisions. Thus, the dependent variable questions were worded to include "suggest" as well as "make" when referring to performance-related decisions. Generally, the initial interview subjects were willing and able to discuss their own performance evaluation practices as well as their perceptions of the practices of others. Some subjects were quite opinionated regarding the evaluation of performance, openly criticizing the "official" system. Other interviewees stressed the need for standardization and formality. Practices seemed to vary within organizations as much as among organizations, strongly implying the existence of individual differences.

The Questionnaire The questionnaire consisted of four parts (see Appendix B), and measured five primary research variables. Three of the five were established research instruments: 69 LOCUS OF CONTROL, LEADERSHIP STYLE, and ROLE STRESS. The remaining two variables, ATTITUDES and RUFI, were unique to this study. The content and wording of the latter two variables were largely the result of the phase one interviews. V7ith the exception of the demographic information and a multiple choice description of the informal information used, all items solicited seven-point Likert-type responses. Following are brief descriptions of the contents of each part. Part One: Demographics. In part one, subjects were to report their sex, age, level of education, years in current position, and years with the company. Also, the organizational function, or department, was requested and each manager was asked to indicate a "pre-merger" affiliation (see Pretesting for additional discussion of this last item). Part Two: RUFI and ATTITUDES. In order to develop scores for RUFI and ATTITUDES, the subjects were asked to respond to twelve Likert-type questions twice each, once regarding the "official" information used in performance related decision making, and once regarding the "other" information used. Double responses to four Likert-type questions (nine through- twelve) constituted the basis for RUFI scores. Perceptions regarding the extent of influence of both the "official" and "other" information regarding merit pay 70 adjustments, promotions, terminations, and periodic performance evaluations were recorded on seven-point scales. Four indicants of the relative use of formal and informal information are the differences between the "official" and "other" responses. Since the "official" responses were subtracted from the "other" responses in computing the relative scores, positive scores indicated greater reliance on informal than formal information. Therefore, four indicants of RUFI were obtained along a continuum of scores from negative six (total reliance on the "official" information) to positive six (total reliance on the "other" information). The first eight (numbered) questions in part two solicited qualitative judgments regarding the accuracy, completeness, ease of use, extent of detail, understandability, confidentiality, timeliness, and quantitative/qualitative nature of the information. Responses to these eight questions were presumed to be indicative of the subjects' general attitudes toward both the formal and the informal information. An additional question was included in part two in order to provide a validity check on the formal versus informal distinction and to aid in interpretation of the results. A general description of the "other" information used was obtained using a multiple choice format (first question, not numbered). The alternatives provided were 71 developed from the phase one interviews and ranged from "an organized, documented set of records, memos, or other data" to "unwritten advice and/or memory." Also, a "none of the above (please specify)" option was available.

Part Three: ROLE STRESS and LOCUS OF CONTROL. Fourteen questions addressed ROLE STRESS and were from Rizzo, House, and Lirtzman [1970]. Eight of the fourteen referred to role conflict, whereas the remaining six addressed role ambiguity. The Rizzo, House, and Lirtzman scale has been widely applied and generally supported in the literature [Van Sell, Brief, and Schuler, 1981]. The remaining fifteen items in part three assessed LOCUS OF CONTROL.

Robinson and Shaver [1973] report that most researchers have applied the 58-item (29 pair), forced choice format instrument developed by Rotter [1966] and Lefcourt [1966, 1972] in measuring locus of control. Collins [1974] converted the scale to a 58-item Likert-type instrument in order to avoid the forced choice format and to facilitate factor analysis. From the analysis reported by Collins, fifteen questions were identified as particularly significant. These fifteen items were the LOCUS OF CONTROL questions in part three of the questionnaire. An experiment using 234 undergraduate business students of a large university in the southwest supported the validity of the abbreviated instrument 72 [McGill and Johnson, 1986]. The fifteen item "LOC short" scale produced scores that correlated strongly with scores on the Rotter "LOC long" instrument (.63). Further, LOC short was found to have a test-retest reliability of .81 and an alpha coefficient of .80. Part Four: LEADERSHIP STYLE. The questions used to measure LEADERSHIP STYLE were taken directly from the LBDQ Manual [Stodgill, 1963]. Korman [1966, p. 349] noted the significance of the leadership research program conducted at The Ohio State University recognizing that "the most important contribution was isolation of "Consideration" and "Initiating Structure" as basic dimensions of leadership behavior in the formal organization." The LBDQ instrument was used in this study because it provides a measure of subordinates' perceptions of superiors' leadership style and since the instrument has been used in similar studies of information usage in performance evaluation [Hopwood, 1972; 1974]. Perceptions of superiors' leadership behavior, particularly along the structure and consideration dimensions, evidence role-related expectations of salient others. Thus, the LBDQ measurement of the two dimensions was consistent with the role perspective adopted in this research. Ten seven-point Likert-type responses gathered perceptions of the superiors' considerate behavior (CONSIDERATION). Ten others measured initiation of structure (STRUCTURE). 73 Phase Two: A Single-Entity Sample Variation in RUFI may be influenced by a number of factors. In order to concentrate on individually-oriented, intraorganizational influences, the empirical data were from within a single operational department in a single entity. A single-entity study was consistent with the role perspective previously discussed and was designed to eliminate the variance attributable to interorganizational factors. Further, the sample population was restricted to operations management in order to reduce variation in job design as much as possible. The population sampled was operations management of the transportation division in the subject entity—a Fortune 100 company involved primarily in transportation and energy. All of the managers were line managers (as opposed to staff managers) and all were core managers in that each had limited contact with external parties. Each manager had at least one subordinate, thus was presumed to have input in performance related decision making. The subordinates were either other managers or non-managers responsible for the construction, maintenance, and/or operation of equipment and facilities used in the transportation of goods. Managers in support groups (accounting, personnel, purchasing, etc.), top (executive) management, and marketing were not represented. Thus, the managers and the subordinates constituted two fairly 74 homogenous groups with reasonably similar job designs. Approximately 500 managers constituted the population. Of the managers, 279 were randomly selected to participate as research subjects. A convenience sample of seven other managers was made available to participate in pretesting the questionnaire.

Pretesting

Pretesting interviews were more structured than the phase one interviews in that administration of the entire questionnaire preceded general discussion and specific questioning regarding the instrument. Also, all of the subjects involved in the pretesting were from the population to be sampled by questionnaire. Seven managers of a local facility of the subject entity participated in pretesting interviews. Generally, the subjects required no assistance other than a brief introduction, completed the questionnaire in less than fifteen minutes, and made few specific comments. However, several of the participants suggested that the responses might differ between two distinguishable elements in the organization. Recent merger activity resulted in an organization consisting of two operating factions, each still relatively independent, with geographical and other distinctions. The pretest subjects suggested that the identification of responses by "pre-merger affiliation" 75 might provide information useful in understanding variation in RUFI within the research entity. Accordingly, a final question was added to part one of the questionnaire in order to enable analysis by operating faction.

Distribution and Response The names and addresses of 279 managers were provided by the research contact, the senior operations executive of the research entity. The sample was stratified in that 219 of the managers were mid-to-low-level managers of decentralized operations throughout the central and western U.S., whereas 60 of the managers were mid-to-upper-level managers of operations at the subject entity's headquarters. Initial mailings to each subject included the questionnaire, a stamped return envelope, and a letter of introduction from the senior operating executive. The letter described the study and encouraged participation. The packages were sent to the subjects' homes with the request that the completed questionnaires be returned directly to the researcher. Approximately two weeks after the initial mailings, second requests for participation were sent to all non-responding subjects. For the second mailings, a letter from the researcher accompanied the questionnaire and return envelope. The initial mailings were referred to, and particular emphasis was placed on contacting the 76 researcher by telephone to discuss any reservations or interpretational problems.

Of the 279 subjects selected, 207 responses were received for an overall response rate of 74 per cent, six of the responses were unusable because the RUFI questions were not answered ("usable" response rate of 72%). The sample was almost entirely male (99%) . Only 6 percent of the managers selected were less than 31 years of age. 98 percent of the subjects had completed high school, 67 percent reported some college, and 34 percent were college graduates. Approximately one third of the subjects were occupying positions they had held for two years or less and an additional third reported only three to four years in their current position. Half of the managers had been affiliated with the subject company in excess of fifteen years (26% in excess of 26 years) whereas only five percent had been with the company five years or less. Except for the exceptionally low number of female participants, the demographic information appeared to provide a reasonable profile of mid-to-low level business managers. Although always an issue with self-report data, there was no indication of non-response bias. Table 4.1 (following page) reports the results of tests of differences in the means of the research variables between those who returned the first questionnaire and those who returned the second. 77

Table 4.1: Non-Response Bias Test Results

Test F-stat PR > F

Wilks' Criterion 1.17 .2607 L = .80117227

Pillai's Trace 1.17 .2607 V = .19882773

Hotelling-Lawley Trace 1.17 .2607 Trace = .24817101 Roy's Maximum Root Criterion 1.17 .2607 Criterion = .24817101 78 Based on the premise that those who respond to subsequent requests are similar to those who do not respond [Pace, 1939; Armstrong, 1977], the lack of significant differences indicates that non-response bias is not a significant issue.

Statistical Analysis - LISREL Since the research addressed a number of latent (unobservable) constructs, data analysis techniques of factor analysis and structural equation models were both desired. The statistical technique chosen is the covariance structure modeling technique available through the program LISREL [Joreskog and Sorbom, 1985]. Sujan [1986, pg. 45] noted an advantage of LISREL over traditional regression techniques that is particularly relevant to this research: "(H)ypotheses can be tested in the context of other relationships."

Several strengths of LISREL were noted by Bagozzi

[1980; p. 107]: 1. The general linear model is a comprehensive scheme for representing all of the elements and relationships of a theory in a single structure. 2. The general linear model provides one with direct measures of the degree to which theoretical constructs are related, the extent of errors in equations and variables, and the relationships between constructs and operationalizations. 79 3. Since the approach is a maximum likelihood procedure, parameter estimates are independent of scales of measurement for the variables in the model.

4. LISREL provides a test statistic for one's entire model. I 5. Finally, as Burt [1973] indicates, maximum likelihood estimates from procedures such as LISREL are "optimally efficient . . . over variable sample sizes" and are "robust over nonnormality." Several limitations, or assumptions, of LISREL were noted also by Bagozzi: The data are assumed to be interval scaled, functional relationships among variables are assumed to be linear, the observations are assumed to be from a multivariate normal distribution, and specific hypotheses must be substantially supported a, priori.

An Introduction to LISREL The LISREL model was introduced by Joreskog [1973] and has been applied in a variety of research appearing in journals of psychology, sociology, econometrics, and various other social sciences. Generally, the LISREL computer program uses maximum likelihood procedures to estimate the unknown coefficients in a set of linear equations. "The program is particularly designed to handle models with latent variables, measurement errors, and reciprocal causation (simultaneity, interdependence)" [Joreskog and Sorbom, 1985, p. 1.2]. 80 The LISREL model consists of a measurement model that specifies how each of the latent (unobservable) constructs relate to the observed variables, and a structural model that specifies the relationships among the latent constructs (including causation). Using either raw input or a matrix of the relationships between the observed variables, the program is able to generate maximum likelihood estimates of the parameters in the model, such as the strengths of the relationships among the latent variables, the measurement errors, and the modeling error. Application of LISREL requires an a_ priori specification j of the relationships among the variables. j

Model Specification Figure 4.1 (next page) is an illustration of the LISREL_model applied in this research. The LISREL model is an extension of the previously specified research model.

Two dimensions of both LEADERSHIP and ATTITUDES are presented so that all of the hypothesized relationships can be studied. Also, a number of additional variables and relationships are illustrated to reflect the observed variables and their relationships with the latent constructs (i.e., measurement). Generally, the straight lines indicate causal relationships v/hereas the curved lines recognize relationships without specifying causality. 81

Figure 4.1: The LISREL Model 82 In LISREL terminology (summarized in Figure 4.2, following page), the model consists of six latent variables (the research variables of interest) and a number of observable variables. Four of the latent variables (STRESS, LOCUS OF CONTROL, CONSIDERATION, and STRUCTURE) are referred to as exogenous (xi) variables since they are presumed not to be "caused" by other latent variables in the model. ATTITUDES and RUFI are endogenous (eta) since they are depicted as being "caused" by other latent variables in the model. The direct causal effects among endogenous variables are referred to as "beta's", and the direct causal effects of the exogenous variables on the endogenous variables are called "gamma's." Correlational relationships among the exogenous variables are referred to as "phi's." The "zeta's" represent influence on the endogenous variables not explained ("modeling" error). The observed variables are referred to as either "x" variables, which are indicants of the exogenous variables, or "y" variables, which are indicants of the endogenous variables. "Lambda-x" denotes a relationship between an "x" variable and a exogenous variable, whereas "lambda-y" denotes a relationship between a "y" variable and an endogenous variable. Errors in measuring x's are "delta's" and errors in measuring y's are "epsilon's." The x's and y's can be single indicators of the latent construct or 83 Terms - General:

V (eta) - a latent endogenous variable (xi) - a latent exogenous variable y - an observed indicator of an endogenous variable x - an observed indicator of an exogenous variable p - the number of y-variables q - the number of x-variables m - the number of ^-variables n - the number of I-variables Terms - Specific:

"fl ATTITUDES (formal) V2 ATTITUDES (informal) !!3 RUFI h LOCUS h STRUCTURE h CONSIDERATION ^4 STRESS yl - y8 indicators of ATTITUDES (formal) y9 - yl6 indicators of ATTITUDES (informal) yl7 •- y20 indicators of RUFI xl - x5 factor scores for LOCUS x6 - x7 factor scores for STRUCTURE x8 - x9 factor scores for CONSIDERATION xlO •- xl2 factor scores for STRESS Parameter Matrices:

Ay (Lambda-Y) - a pxm matrix of the relationships among y's and v 's Ax (Lambda-X) - a qxn matrix of the relationships among x's and ^ 's B (Beta) - an mxm matrix of the relationships among the V 's r (Gamma) - an mxn matrix of the relationships among the ^'s and the V 's * (Phi) - an nxn matrix of the relationships among the ^'s ^ (Psi) - an mxm matrix of the relationships among the ^'s error terms (f's) Be (Theta-Epsilon) - a pxp matrix of the relationships among the y's error terms (c's) 65 (Theta-Delta) - a qxq matrix of the relationships among the x's error terms (6's)

Figure 4.2: LISREL Notation 84 factor or composite scores representing a number of indicators. In the model presented, xl through x5 are factor scores for LOCUS OF CONTROL, x6 and x7 are factor scores for STRUCTURE, x8 and x9 are factor scores for CONSIDERATION, and xlO through xl2 are factor scores for STRESS. Responses to the ATTITUDES items were used to measure ATTITUDES (formal) (yl to y8) and ATTITUDES (informal) (y9 to yl6). Four relative scores (yl7 to y20) measure RUFI. From the model, and using the LISREL terminology, it is now possible to present equations for the structural and measurement models. Figure 4.3 (following page) presents both the general forms for the equations and the equations specific to this research. 85 Structural Equations: General: v = Bri + T^ r

Spe ci: fie: '''I 0 0 0 ''I ni '^12 ^13 "^14 r^i fl T?2 = i821 0 0 r?2 "^21 ^^22 '^23 "^24 «2 + h ^^3 1831 1832 0 ^^3 ')^31 ^^32 '^33 "^34 |3 !-3 [h U mJ Measurement Equations

General: Ax^ + 5 and Ay'? + c

Specific: xl Xll 0 0 0 \' x2 ^21 0 0 0 h x3 ^31 0 0 0 h x4 X4I 0 0 0 — —. 64 x5 X51 0 0 0 ?l| 55 + x6 = 0 ^62 0 0 h 56 x7 0 X72 0 0 «3 57 x8 0 0 M 13 0 h 58 •J x9 0 0 Xc) 3 0 69 XlO 0 0 0 XlO,4 5lO xll 0 0 0 Xll,4 5ll xl2 0 0 0 Xl2,4j 6l2 " and yl "Xll 0 0 ^1 y2 X21 0 0 «2 y3 X31 0 0 «3 y4 Ml 0 0 U «5 y5 X51 0 0 0 «6 y6 ^61 0 X71 0 0 «7 y7 «8 X81 0 0 r- y8 0 X9,: > 0 ''I '9 y9 0 XlO, 2 0 '?2 «10 ylO 0 Xll, 2 0 ^3 *11 yll 0 X12. 2 0 n2 yl2 0 Xl3, ,2 0 «13 yl3 0 Xl4< ,2 0 «14 yl4 0 Xl5< r2 0 ^15 yl5 0 XI6 r2 0 ^6 yl6 0 0 Xl7,3 «17 yl7 0 0 Xl8,3 «18 yl8 0 Xl9,3 «19 0 ^20 yl9 0 0 X20,3 y20 1

Figure 4.3: LISREL Equations CHAPTER V

EMPIRICAL RESULTS

The primary statistical technique applied in analyzing the questionnaire data was introduced in the previous chapter. The purpose of this chapter is to report the results of that analysis. Before discussing the fit of the LISREL model and reporting the results of the tests of hypotheses, a discussion of the steps taken to validate the research constructs is provided and the results of tests of significance of the demographic and other potentially useful variables are provided.

Verification of the Research Constructs Tests of validity were performed on the three established research constructs (LOCUS OF CONTROL, ROLE STRESS, and LEADERSHIP STYLE). Extended analyses were afforded the two variables unique to this research—the explanatory variable, ATTITUDES, and the dependent variable, RUFI. Simple descriptive statistics for the RUFI questions are presented in Table 5.1 (following page).

86 87

Table 5.1: Responses to RUFI Items

Standard Variable (Dimension) Mean Deviation

RUFIl: Pay Adjustments .42 1..8 0

RUFI2: Promotions .65 1..5 9 RUFI3: Terminations .32 1..9 2 RUFI4: Appraisals .29 1..5 1 88 The Relative Use of Formal and Informal Information

The range of scores possible for each of the four indicants of RUFI (RUFIl, RUFI2, RUFI3, and RUFI4) was -6 (total reliance on formal information) to +6 (total reliance on informal information). RUFIl and RUFI2 ranged from -5 to +6, RUFI3 varied over the entire range, and RUFI4 ranged from -5 to +5. Mean scores for each of the four were positive (.42, .65, .33, and .29, respectively), indicating that the subjects perceived greater reliance on the informal information than on the formal information in all four performance-related decision situations: pay (RUFIl), promotion (RUFI2), termination (RUFI3), and periodic evaluation (RUFI4). T-tests for differences in means indicated significant differences (alpha < .05) between formal and informal system responses for each of the four items (see Table 5.2, following page). Also, significant positive correlations among the four scores supported the premise of a common underlying source of variation (see Table 5.3, page 90). Two additional analyses provided additional support for the use of RUFI as a research construct. First, factor analysis of the RUFI scores suggested the use of a single factor. The first extracted factor using the principal components method was able to explain over 70% of the 89

Table 5.2: Tests For Differences in RUFI Responses

Mean Std. Dimension Diff. Error T PR > T

Pay Adjustments .42 .13 3.29 .0012**

Promotions .65 .11 5.78 .0001***

Terminations .32 .14 2.39 .0178*

Appraisals .29 .11 2.68 .0079**

* - significant at the .05 level ** - significant at the .01 level *** - significant at the .001 level 90

Table 5.3: Correlations Among RUFI Responses

Dimension: Pay Adjustments Promotions Terminations

Pay Adjustments 1.00

Promotions .72 1.00

Terminations .59 53 1.00 Appraisals .63 62 .54 91 variance (eigenvalue of 2.84), whereas the remaining factors were each able to explain less than 13% of the variance (eigenvalues less than .5). The minimum promax rotated factor loading on the single factor was .79 and the minimum communality estimate was .62. Second, a reliability analysis supported the use of RUFI as a measurement scale. The calculated reliability coefficient (alpha) of .86 would have decreased slightly if any of the four scores were deleted. Thus, the four scores seemed to produce a reasonably accurate and reliable measurement of the construct RUFI.

As indicated in the previous chapter, an additional item was included in the questionnaire to provide a validity check on the formal/informal distinction and to facilitate interpretation. A multiple choice question solicited subjects' descriptions of the informal information relied on in performance-related decision making. Eleven subjects (5.5%) did not respond to the question and no "other" responses were provided. Of those responding, 74% described the informal information as "some combination of documentation, advice, and memory" (response C). An additional 17% of the subjects reported the use of "an organized, documented set of records, memos, or other data" (response A). Responses B, "a loose collection of documentation," and D, "unwritten advice and/or memory," comprised the remaining 9%. Thus, more than 90% of the 92 managers indicated that at least some of the informal information was documented (response A, B, or C) , and almost 80% of the managers included "advice and/or memory" (responses C or D). Additional information descriptive of both the formal and the informal information was available in the responses to the ATTITUDES questions.

Attitudes Toward Formal and Informal Information Table 5.4 (following page) contains descriptive statistics for each of the sixteen ATTITUDES items (AFl to AF8 for formal. All to AI8 for informal). The eight questions referred to accuracy, completeness, ease of use, extent of detail, understanding, confidentiality, timeliness, and quantitative/qualitative nature of the information, respectively. Mean scores for all but one of the fourteen responses were above the scale midpoint of 4. Suggested was that both the formal and the informal information were perceived to be accurate, complete, easily usable, understood, and timely. Also suggested were that both types of information were more "words" than "numbers" (AF8, AI8) and that both were closer to "excessive" than "little" in detail provided (AF4, AI4). Finally, the mean responses to the confidentiality question were above the midpoint for the informal information (AI6) but below the midpoint for the formal information (AF6). 93

Table 5.4: Responses to ATTITUDES Items

Formal Informal

Dimension Mean S. D Mean S. D

Al: Accurate 5.06 1.27 5.08 1.14 A2: Complete 4.87 1.33 4.93 1.13

A3: Easy to Use 4.88 1.64 5.37 1.39

A4: Detailed 4.64 1.43 4.47 1.21

A5: Understandable! 5.13 1.37 5.72 1.13

A6: Confidential 3.54 1.69 4.45 1.75

A7: Timely 4.25 1.72 5.07 1.36 A8: Qualitative 4.37 1.37 4.68 1.19 94 The ATTITUDES responses were also interpretable on a relative basis, providing some indication of the subjects' conceptualizations of both the formal and the informal information. All but one of the mean relative ATTITUDES scores (RELATl to RELAT8) were positive. Suggested was that informal information was more accurate, more complete, more easily usable, less detailed, better understood, more timely, more confidential, and more qualitative than the formal information. However, t-tests for differences in mean responses to each of the eight pairs of ATTITUDES items indicated that not all of the suggested relationships were significant (see Table 5.5, following page). Five of the eight pairs of responses differed significantly (less than .01); whereas three of the pairs did not (min. of .17). Formal responses were significantly different from informal responses for ease of use, understanding, confidentiality, timeliness, and quantitative/qualitative nature of the information. Perceptions of accuracy, completeness, and extent of detail did not significantly vary. Factor analysis of the sixteen ATTITUDES responses supported both a common theme throughout the sixteen and a formal/informal distinction. The first two extracted factors"(principal components) had eigenvalues of 5.3 and 1.9, respectively, and together explained over 45 per cent of the variance. No other factors explained as much as 10 95

Table 5.5: Tests for Differences in ATTITUDES Responses

Mean Std. Dimension Diff. Error PR > T

Al: Accurate 02 .10 .26 .7948 A2: Complete 06 .10 .58 .5659

A3: Easy to Use 49 .11 4.43 .0001***

A4: Detailed 17 .12 1.37 .1713 A5: Understandable 59 .09 6.36 .0001*** A6: Confidential 91 .13 7.27 .0001*** A7: Timely 82 .12 6.77 .0001*** A8: Qualitative 31 .11 2.82 .0052**

* - significant at the .05 level

** - significant at the .01 level

*** - significant at the .001 level 96 percent of the variance. Prior to rotation, 15 of the 16 variables loaded most heavily on the first factor (all positive), and the second factor consisted of only negative loadings for the formal items and only positive loadings for the informal items (see Table 5.6, following page). Promax rotated factors emphasized the distinction since all eight of the formal responses loaded more heavily on the first factor than on the second and all eight of the informal responses loaded more heavily on the second factor (see Table 5.7, page 98).

In the LISREL model the two sets of eight responses (formal and informal) were used as indicators of two closely-related latent constructs—ATTITUDES (formal) and ATTITUDES (informal).

Role Stress Mean responses to the individual STRESS items ranged from 2.65 to 5.02 with standard deviations of approximately 2. The 14-item scale produced a reliability coefficient (alpha) of .83, a grand mean of 3.86, and a mean aggregate score of 54 on a scale from 0 to 98 (standard deviation of 14). Thus, even though a significant amount of variation was evident, the overall level of role stress perceived by the subjects was only slightly above the midpoint, and the scale appeared to produce a reliable measure of an underlying construct. These results seem to be comparable 97 Table 5.6: Initial Factor Loadings: ATTI TUDES

First Source Second Dimension Factor Factor AFl: Accurate .67314 -.44712 AF2: Complete .69153 -.49501 AF3: Easy to Use .65399 -.38384 Formal AF4: Detailed 51393 -.33465

AF5: Understandable ,68444 -.26342 AF6: Confidential 17258 -.10038 AF7: Timely 61525 -.32301 AF8: Qualitative 33530 -.24041

All: Accurate 66498 .29753 AI2: Complete 65304 .31906

AI3: Easy to Use 67764 .37850 Informal AI4: Detailed 58504 .42760 AI5: Understandable 67902 .39805 AI6: Confidential 20838 .33876 AI7: Timely 62884 .41585 AI8: Qualitative 37842 .07405

Eigenvalue 5.32561 1.91390

Percent Explained .3329 .1196 98

Table 5.7: Promax Rotated Factor Loadings: ATTITUDES

First Second Source Dimension Factor Factor AFl: Accurate .80740 .32661 AF2: Complete .84795 .31633 AF3: Easy to Use .75824 .34453 Formal AF4: Detailed .61296 .25298 AF5: Understandable .72188 .43502 AF6: Confidential .19961 .09141 AF7: Timely .69358 .34463 AF8: Qualitative .41135 .15316

All: Accurate .41458 .72057 AI2: Complete .39321 .72210 AI3: Easy to Use .38346 .77483

Informal AI4: Detailed .27881 .72322 AI5: Understandable .37451 .78652 AI6: Confidential .00269 .35796 AI7: Timely .32237 .75381 AI8: Qualitative .29852 .36958 99 with other studies of role stress in organizations reporting "moderate" levels of stress. For example,

Collins, Seller, and Clancy [1984] report mean stress scores ranging from 2.32 to 5.00 (1 to 6 scale) and

Collins, Anderson, and White [1984] report mean scores ranging from 2.22 to 6.62 (1 to 7 scale). Similarly,

Collins and Johnson [1986] report grand means of 2.22 (1 to

5 scale) and Collins and Munter [1986] report grand means of 2.89 (1 to 5 scale).

Locus of Control and Leadership Style Since LOCUS OF CONTROL and LEADERSHIP STYLE were established research constructs, minimal verification efforts were necessary. Reliability coefficients (alpha's) were calculated for the 15-item LOCUS OF CONTROL scale, the 10-item STRUCTURE scale and the 10-item CONSIDERATION scale. The resulting reliability coefficients were .84 for the LOCUS OF CONTROL scale, .90 for the STRUCTURE scale, and .91 for the CONSIDERATION scale.

Also, factor analyses were performed on the LOCUS OF CONTROL, STRUCTURE, and CONSIDERATION scores. In model fitting and hypotheses testing efforts, promax rotated factor scores for the three variables (and STRESS) were used instead of individual item responses. The use of factor scores simplified the structure and reduced computer time and space requirements. Three ROLE STRESS factors, 100 five LOCUS OF CONTROL factors, two STRUCTURE factors, and two CONSIDERATION factors were selected and rotated (promax). Twelve factor scores were produced for each subject. A covariance matrix of the sixteen ATTITUDES responses, the four RUFI scores, and the twelve factor scores was used as LISREL input.

Demographics and Other Potential Explanatory Variables Each of the managers were asked to provide their sex, age, highest level of education attained (education), length of time in their current position (position), length of time with the company (career) , operating department (department), and "pre-merger" affiliation (faction). There was an insufficient number of female subjects to allow meaningful analysis of the demographic variable sex. The influence of the other demographic variables (age, education, position, and career) was assessed using an expanded LISREL model. None of the demographic variables were found to be significant. Appendix C contains a more complete description of the expanded model and the analysis. Table 5.8 (following page) reports the results of multivariate tests for differences in the means of the research variables by department. Table 5.9 (page 102) reports the results of similar tests for differences by w

101

Table 5.8: Tests for Differences by Department

Test F-stat PR > F

Wilks' Criterion 1.12 2254 L = .52451467

Pillai's Trace 1.13 .2160

V = .57765131 Hotelling-Lawley Trace 1.11 2353 Trace = .72447895 Roy's Maximum Root Criterion 1.50 (upper bound) Criterion = .31808725 102

Table 5.9: Tests for Differences by Facti on

Test F-stat PR > F

Wilks' Criterion .90 .6207 L = .83943998 Pillai's Trace .90 .6207 V = .16056002 Hotelling-Lawley Trace .90 .6207

Trace = .19127039 Roy's Maximum Root Criterion .90 .6207 Criterion = .19127039 103 faction ("pre-merger" affiliation). Neither department nor faction was associated with significant differences. Thus, none of the demographic or other variables were included as LISREL input for hypothesis testing. Further, the lack of significant differences in the responses by department supports the contention of homogeneity in job design throughout the population sampled.

Testing Hypotheses with LISREL Tests of hypotheses with LISREL consist of comparing the goodness of fit of one model to that of another. The null hypothesis of no significant differences between the overall fit of the two models is rejected when the change in degrees of freedom is accompanied by a significant change in the Chi-square statistic for the total model. The two models must be subsets of a larger model, and must differ by the inclusion (or exclusion) of the relationship(s) being tested. The procedure outlined was suggested by Bentler and Bonnet [1980] , and supported with Monte Carlo evidence of the asymptotic independence of sequential Chi-square difference tests by Steiger, Shapiro, and Browne [1985]. In essence the tests examine whether the addition (or deletion) of the hypothesized relationship(s) significantly improves the fit of the model to the data. 104 The LISREL model that served as a basis for testing the research hypotheses was presented near the end of the previous chapter (Figure 4.1, page 81). All models used in testing the research hypotheses were "nested" in that model, thus any two could be "compared" using the change in the degrees of freedom and the change in the Chi-square statistic. Previous discussions in this and the previous chapters have explained how the data were obtained and prepared for input. Selected LISREL output from the "null" model (i.e., no explanatory variable influence) is presented in Appendix D. Appendix E contains similar data except that ATTITUDES (formal and informal) were modeled as having causal influence on RUFI. Comparison of these two models serves to illustrate hypothesis testing with LISREL while testing the first research hypothesis—ATTITUDES are related to RUFI.

The model examined in Appendix D (the null model) has

458 degrees of freedom and a Chi-square statistic of

985.32. The Appendix E model has 3 fewer degrees of freedom and a Chi-square of 882.03. Since the change in the Chi-square of 103.29 is larger than the critical

Chi-square value at a .05 level of significance and 3 degrees of freedom (7.8), the null hypothesis of no difference between the two models was rejected. A significant part of the variation in RUFI was explained by variation in ATTITUDES. 105 Tests of Hypotheses

To test hypotheses 2 through 5, each of the explanatory variables (other than ATTITUDES) were depicted as having a direct influence on RUFI in addition to the influence of ATTITUDES. LOCUS, STRUCTURE, CONSIDERATION, and STRESS were each tested for direct influence on RUFI individually and without the indirect influence of any of the four on RUFI through ATTITUDES. The only difference between the two models compared for each test was the "freedom" of the parameter representing the direct relationship between the explanatory variable being tested and RUFI. In each case the "null" model for the tests of direct effects was the Appendix E model. The results of the tests of hypotheses 2 through 5 are presented in Table 5.10 (following page). With ATTITUDES in the model, none of the direct effects of the remaining explanatory variables of interest on RUFI were able to significantly contribute to the fit of the model. Thus, null hypotheses 2 through 5 could not be rejected. The alternate hypotheses of direct effects on RUFI were not supported so were not reflected in subsequent models.

The same procedure was used to test hypotheses 6 through 9 except that tv70 parameters were involved in each test. Since ATTITUDES were modeled as two endogenous variables, two parameters differed from the Appendix E 106

Table 5.10: Tests of Direct Hypotheses

Chi- Model Square Diff. D.F

Base: 882.03 - 455 Includes ATTITUDES-RUFI Base plus LOCUS-RUFI 880.85 1.18 454 Base plus STRESS-RUFI 880.70 1.33 454 Base plus STRUCTURE-RUFI 881.11 .92 454 Base plus CONSIDERATION-RUFI 880.94 1.09 454

* - significant at the .05 level ** - significant at the .01 level *** - significant at the .001 level 107 model for each test. The results of the tests are presented in Table 5.11 (following page). With the relationships among ATTITUDES and RUFI recognized in the model, and without the direct influences of LOCUS,

STRUCTURE, CONSIDERATION, and STRESS on RUFI, any one of the four latter variables was able to contribute significantly to the overall fit of the model by explaining part of the variation in RUFI through ATTITUDES. Rejection of null hypotheses 6 through 9 was supported, however, additional testing was necessary to substantiate the suggested relationships. Sequential tests of contribution to the model fit were performed to more rigorously test hypotheses 6, 8, and 9. The sequential testing procedure differed from what has been described only in that the most significant single contributor to the model was retained each time all candidates were tested. In the initial testing of indirect explanation of variation in RUFI through ATTITUDES (hypotheses 6 through 9), the most significant improvement was provided by the addition of the STRESS to ATTITUDES link. Thus, the STRESS to ATTITUDES link was reflected in the model for subsequent hypothesis-testing "rounds." The associated null hypothesis (7) could not be rejected, however, because the direction of the relationship was the reverse of that hypothesized. Next, the influence of each 108

Table 5.11: Preliminary Tests of Indirect Hypotheses

Chi- Model Square Diff. D.F

Base: 882.03 - 455 Includes ATTITUDES-RUFI

Base plus LOCUS-ATTITUDES 855.23 26.80*** 453 Base plus STRESS-ATTITUDES 848.00 34.03*** 453 Base plus STRUCTURE-ATTITUDES 852.76 29.27*** 453

Base plus CONSIDERATION- ATTITUDES 857.84 24.19*** 453

* - significant at the .05 level ** - significant at the .01 level *** - significant at the .001 level 109 of the remaining explanatory variables (LOCUS, STRUCTURE, and CONSIDERATION) on RUFI through ATTITUDES was tested individually. The results of the sequential tests of hypotheses 6 through 9 are presented in Table 5.12 (following page). With the influence of STRESS and ATTITUDES in the model, LOCUS, STRUCTURE, and CONSIDERATION were not able to contribute significantly to the fit. Thus, null hypotheses 6, 8, and 9 could not be rejected.

Stress as an Endogenous Variable: A Fitted Model Recognizing that LOCUS, STRUCTURE, and CONSIDERATION were potentially useful in explaining variation in STRESS (thus RUFI), an additional model was tested in search of a "best fit" LISREL model. STRESS, ATTITUDES, and RUFI were modeled as endogenous, interrelated variables. Sequential testing procedures were used to test for the contribution of LOCUS, STRUCTURE, and CONSIDERATION through STRESS. All three variables contributed significantly to the fit of the model when considered on an individual basis. The largest individual contribution was from LOCUS. Thus, LOCUS was included in the model used to test STRUCTURE and

CONSIDERATION. Both STRUCTURE and CONSIDERATION were able to contribute significantly to the model including LOCUS, however CONSIDERATION was not able to improve the fit once the more significant variable STRUCTURE was included. 110

Table 5.12: Sequential Tests of Indirect Hypotheses

Chi- Model square Diff. D.F

Base: 848.00 - 453 Includes ATTITUDES-RUFI, and STRESS-ATTITUDES. Base plus LOCUS-ATTITUDES 844.90 3.10 451

Base plus STRUCTURE- ATTITUDES 846.02 1.98 451

Base plus CONSIDERATION- ATTITUDES 847.79 .21 451

* - significant at the .05 level ** - significant at the .01 level *** - significant at the .001 level Ill Thus, the "best fit" model includes all of the explanatory variables of interest except CONSIDERATION. Selected LISREL output for the fitted model is in Appendix F. The total effects (direct and indirect) of each of the explanatory variables of interest (provided as LISREL output) are presented in Table 5.13 (following page). Figure 5.1 (page 113) illustrates the variables and relationships significant to the fitted model. The implications of these findings and the results of the tests of hypotheses are discussed in the following chapter. 112

Table 5.13: Total Effects: The Fitted Model

ATTITUDES ATTITUDES LOCUS STRUCTURE STRESS (formal) (informal)

STRESS -1.007 -.225 ATT.(form.) .687 .154 -.682 ATT.(inf.) .441 .099 -.438 .434 RUFI -.219 -.049 .217 -.565 1.192 113

LOCUS OF CONTROL

ATTITUDES .-1.007 (formal)

-.682 ^1.083

222 STRESS .434 RUFI

-.141 . 1.192 ATTITUDES -.225 (informal)

STRUCTURE

Figure 5.1: The Fitted Model CHAPTER VI SUMMARY AND CONCLUSIONS

This chapter includes: 1) a summary of the empirical results, 2) discussions of the implications of the findings, 3) a discussion of the limitations of the study, and 4) some suggestions for future research.

Summary of Findings The first of two research objectives was to examine the extent to which informal information was relied upon relative to formal information in performance-related decision making. The data indicate that informal information is relied upon relatively more than formal information in all four of the performance-related decision situations studied: pay, promotion, termination, and periodic appraisal. Mean differences in the relative use of formal and informal information ranged from .29 for appraisals to .65 for promotions (scale of -6 to +6). These results are consistent with the findings of Clancy and Collins [1979] that "a strong majority, 79 per cent, of the respondents maintained informal accounting information systems" [p. 25], and with the observations of Dirsmith and

114 115 Covaleski [1985] that "(a)11 individuals concurred that informal communication networks were much in evidence in large public accounting firms" [p. 154, emphasis on original]. The results are inconsistent with the findings of Clancy and Collins that "the managers evaluated the formal accounting system somewhat more highly than the informal accounting system" [p. 25, emphasis on original], and the conclusions of Dirsmith and Covaleski that "informal communications . . . play a limited role in informing organizational members of the politics and power within the organization" [p. 149]. Neither study, however, focused on the use of the informal information in performance-related decision making. In this study, the research subjects perceived the informal information relied upon as "some combination of documentation, advice, and memory" (74%). Both the formal and the informal information relied upon were perceived to be accurate, complete, and sufficiently detailed. The informal information was perceived to be easier to use and understand, more confidential, more timely, and more qualitative than the formal information. Clancy and Collins [1979] reported higher mean scores for formal than informal on eight of thirteen measured attitudes. However, the results are in disagreement only slightly. In both the current study and the Clancy and Collins study, both the formal and informal attitudes responses were generally 116 favorable. The data are in disagreement only regarding the timeliness of the information. Clancy and Collins report higher mean scores for ease of use and ability to understand for informal information, and did not address confidentiality or qualitative/quantitative nature. The second research objective was to study the relationships among a number of a priori explanatory variables and the dependent variable of interest—RUFI. Nine hypotheses were stated in order to specify the relationships among RUFI and the explanatory variables of interest—ATTITUDES, ROLE STRESS, STRUCTURE, CONSIDERATION, and LOCUS OF CONTROL. Eight of the null hypotheses could not be rejected. The hypothesized relationship between ATTITUDES and RUFI is supported by the data. Also supported is a significant relationship between ROLE STRESS and ATTITUDES, but the data indicate that high ROLE STRESS is associated with relatively favorable ATTITUDES toward the informal information rather than toward the formal information as hypothesized. Additionally, LOCUS OF CONTROL and STRUCTURE were found to be useful in explaining variation in ROLE STRESS. These relationships are illustrated in model form at the end of the previous chapter (Figure 5.1, page 113), and in the context of the theoretical research model on the following page (Figure 6.1) . 117

Performance

Information

Locus of Control

I Role Stress Attitudes -•RUFI I

Structure Performance Evaluation

Figure 6.1: The Research Model in Context 118 Generally, favorable attitudes toward the informal information lead to relatively greater reliance on the informal information, whereas relatively favorable attitudes toward the formal information lead to relatively less reliance on the informal information. STRESS is negatively related to attitudes toward both formal and informal information, but more negatively related to attitudes toward the formal information. Thus, in a relative sense, high stress leads to relatively favorable attitudes toward the informal information. Finally, perceptions of STRESS (high) are negatively related to LOCUS OF CONTROL (external) and STRUCTURE (high). Internals perceive more stress, and structured behavior of the superior reduces stress. The explanatory value of six additional variables was also assessed. MANOVA was used to test for significant differences in the variables of interest attributable to departmental affiliation or "pre-merger" affiliation (faction). LISREL was used to assess the usefulness of four demographic variables: age, level of education, length of time in current position, and length of time with the research entity. The research variables did not significantly vary by department or by faction, and the demographic variables were not able to significantly improve the fit of the LISREL model. 119 Implications of the Use of Informal Information The relatively greater use of informal information than formal information in performance-related decision making suggests a discrepancy between the formally agreed upon rules of governance in the organization and the true system of rewards. Implied is a propensity for contractual disputes, particularly when the formal system is intended to assure legal compliance. Also implied are dysfunctional consequences to the organization which may result from conflicting or inaccurate "messages" regarding the individuals' roles in the organization. In the extreme, total use of informal information results in an organization in which the organizational goals (as reflected in the formal system) have no bearing on the behaviors of the organizational members. Total reliance on informal information, however, is unlikely. The use of both formal and informal information in performance-related decision making is consistent with a markets and hierarchies perspective (see Chapter II). In fact, the paradigm suggests a need for informal information in order to compensate for the inadequacies of the formal information. This complimentary relationship between the formal and informal information is supported by the results of this study: the mean differences in the use of formal versus informal information were small; and the subjects 120 perceived the formal and informal information to be significantly different in several dimensions (qualitative/quantitative nature, timeliness, confidentiality, understandability, and ease of use). The complimentary nature of the formal and informal information is supported by Clancy and Collins [1979], who suggest, "a major research hypothesis that is not found in existing literature: an informal system supplements rather than replaces a formal system" [p. 29].

Implications of the Relationships Among the Variables The strong relationships among ATTITUDES and RUFI is not surprising. However, the ATTITUDES-RUFI "link" is so strong that the additional explanatory value of any one of ROLE STRESS, LOCUS OF CONTROL, STRUCTURE, and CONSIDERATION directly on RUFI is insignificant. Strongly suggested is the importance of attitudes in explaining behavior in organizations. Personality characteristics, the influences of significant others, and even role related perceptions seem to be useful in understanding behavior only through more specific attitudes.

The importance of ROLE STRESS in explaining variation in RUFI through ATTITUDES supports the role perspective adopted in this study. Also supported is the notion that both personality variables (LOCUS OF CONTROL) and the 121 influence of significant "others" (LEADERSHIP STYLE) effect role-related perceptions. Implied are a number of "connections" or similarities between RUFI and a number of previously studied organizational phenomena, such as budgetary attitudes [Collins, Anderson, and White, 1981; Collins, Seller, and Clancy, 1984], satisfaction [Sapp and Seller, 1980], and budgetary gamesmanship [Collins, Munter, and Finn, 1983].

Policy Implications Perhaps most important to the designers and users of information systems in organizations is the implication that it may not be desirable to force managers to use formal systems exclusively. Further, the nature of business and the situational variability in decision-making in organizations place practical limits on the ability of an information system to remain current and to be flexible enough to meet the managers' needs. Thus, the sole use of formal information in decision making is likely to have both short-term and long-term dysfunctional consequences, and the forced use of inadequate information is likely to compound the problem by negatively effecting attitudes toward that information. The importance of attitudes toward the information in explaining variation in the relative use of formal and informal information suggests that attempts to influence 122 managers' use of the information are best spent altering the managers' attitudes toward the information. Managers' attitudes can be influenced in a variety of ways. Educational efforts and the opinions of significant others may influence an individual's attitudes. Attitudes toward information may also be influenced by changes in certain characteristics of the information. This study found that the formal information is significantly less confidential, less timely, more quantitative, and more difficult to use and understand than the informal information. Thus, improvement in the formal information in these dimensions is likely to improve managers' attitudes toward the formal information and the relative use thereof. The data suggest that attitudes are significantly influenced by perceptions of ROLE STRESS and that ROLE STRESS is significantly influenced by LOCUS OF CONTROL and STRUCTURE. Contrary to expectations, high stress is associated with relatively favorable attitudes toward informal information. Implied is the ability of managers and systems designers to encourage the use of formal systems by reducing stress (conflict and ambiguity). Certain leadership activities are apparently useful in reducing stress, but the effort is complicated by the influence of personality variables (such as LOCUS OF CONTROL). Generally, the importance of individually-oriented variables implies the use of an 123 individually-oriented information system and an individually-oriented managerial approach. Strongly suggested is the need to recognize the demands of the organizational positions and the role-related perceptions of the individuals occupying those positions.

Limitations of the Study Even though a two-stage research design was applied in order to reduce validity concerns, a number of limitations remain. First, the initial interviews, although rich in content and strong in internal validity, may not be totally successful in avoiding all of the substantive and semantic weaknesses of the questionnaire. The instrument is biased toward the perceptions of the interview and pretest subjects. Also, the interview approach to questionnaire development and testing does not preclude the typical questionnaire-related issues of self reported data, sample selection, and non-response bias. Furthermore, interviews are accompanied by additional weaknesses. Classification and summarization are often difficult, and data are subject to such distortions as result from the "halo" effect. Second, as a field study, the study is strong in "realism, significance, strength of variables, theory orientation, and heuristic quality" [Kerlinger, 1973, p. 406], but weak due to the ex post facto nature of the research, lack of precision in measurement, and potential 124 practical issues, such as feasibility, cost, sampling, and time [Kerlinger, p. 407]. Since the variables are measured at one point in time and none of the variables are manipulated, implications of causality are difficult to support. The data support only correlational association, even though previous research, logic, and the statistical technique employed may suggest directionality.

Finally, generalizability of the conclusions is not supportable beyond the population sampled. Similar findings in the interviews and from the questionnaire data support external validity, but additional empirical research efforts are important in validating the research and extending the results of the study.

Suggestions for Future Research Perhaps most needed are contributions toward the measurement of the research constructs, RUFI and ATTITUDES. More specifically, research using "harder" measures of the use of informal information in decision situations is needed. Controlled experiments and archival studies may be useful in understanding the sources of information used by decision makers in organizations. Additional dimensions and alternative indicators of individuals' attitudes toward the information used may also be beneficial. The apparently conflicting findings of Clancy and Collins [1979] with those of the current study regarding attitudes 125 suggest that different dimensions may be more important than others in different decision situations or in different organizations.

Also suggested are studies of RUFI and ATTITUDES in other entities, other industries, and across organizational and industry boundaries. A number of organizational variables, industry characteristics, and environmental influences have the potential of explaining interorganizational variation in ATTITUDES and RUFI. On a more individual level, RUFI and ATTITUDES may be influenced by the nature of the position occupied by the individual being evaluated or by the nature of the position occupied by the individual making the performance-related decisions. Certain organizational activities are more easily monitored than others. Accordingly, different types of information may be necessary in evaluating the performance of individuals with differing organizational responsibilities. Similarly, organizational responsibilities vary in the extent to which an individual is required to perform as an individual versus perform as a group member. Thus, studies of the relationships among RUFI and ATTITUDES and characteristics of the positions occupied by the individuals are suggested. The importance of STRESS in explaining variation in RUFI contributes to the large volume of research including role stress as an explanatory variable, and the 126 significance of LOCUS OF CONTROL and STRUCTURE in explaining variation in STRESS contributes to the research including role stress as a dependent variable. Suggested is the continued use of the role perspective for research in organizations. Additional research of the causes and effects of role stress would contribute toward the understanding of behavior in organizations. More specific to this study, the finding that stress leads to relatively favorable attitudes toward (and thus relatively more use of) informal than formal information in performance-related decision making suggests the need for supporting research. Finally, the study demonstrates the usefulness of covariance structural modeling (LISREL) in studying complex organizational phenomena. The application of the methodology in similar situations involving latent constructs and numerous relationships among the constructs of interest is suggested. REFERENCES

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138 139

1. When do you evaluate performance?

2. What influences performance evaluation?

3. What information does the company suggest you should use?

4. What kind of information do you get from the company?

5. Describe the other information you use.

6. What does "formal" information (system) mean to you?

7. What is wrong with the formal information it produces?

8. What do you like/dislike about the formal information?

9. What do you like/dislike about the other information? APPENDIX B

QUESTIONNAIRE

140 141 PART ONE: DEMOGRAPHICS Instructions: Please circle the correct response for each of the following general questions about yourself. 1. Sex: MALE FEMALE 2. Age: under 21 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 over 60 3. Highest level of your education: GRAMMAR SCHOOL SOME HIGH SCHOOL HIGH SCHOOL GRAD. (or GED) SOME COLLEGE COLLEGE GRAD. GRADUATE DEGREE 4. Years in current position: 1 or less 2 3 4 5 6 7 8 9 10 or more 5. Years with the company: 1 or less 2-5 6-10 11-15 16-20 21-25 26 or more 6. Faction: (1 or 2) 7. Department: (1, 2, 3, or 4) 142 PART TWO: ATTITUDES AND RUFI Instructions: Below you will be asked a number of questions about the information you use in making performance related decisions in your company. Please answer each question twice. The first response (Section A) refers to "official" company information (anything produced, required, or suggested by company policy or procedure). The second response (Section B) refers to any other information used, such as a "personally-maintained" file or system, memory, or the advice of others. First, please indicate which of the following best describes the "other" information you rely on: A. An organized, documented set of records, memos, or other data. B. A loose collection of documentation. C. Some combination of documentation, advice, and memory. D. Unwritten advice and/or memory. E. Other (please specify):

1. How accurate is the information? 2. To what extent does the information "cover" vital items? 3. How easy is it for you to use the data? 4. To what extent is the information detailed? 5. How would you describe your understanding of the information? 6. How confidential is the information 7. How timely is the information? 8. To what extent is the data numbers vs. words? 143 9. To what extent does the information influence your decisions (or suggestions) regarding merit pay adjustments of subordinates? 10. To what extent does the information influence your decisions (or suggestions) regarding promotions of subordinates? 11. To what extent does the information influence your decisions (or suggestions) to terminate the employment of subordinates? 12. To what extent does the information influence the periodic performance evaluations you prepare? 144 PART THREE: STRESS AND LOCUS

Instructions: Please indicate how you feel about each of the following statements by circling the best response from 1 (strongly agree) to 7 (strongly disagree).

1. I receive an assignment without adequate resources and materials to execute it. 2. I have to do things that should be done differently, i^

3. I know what my responsibilities are.

4. I know that I have divided my time properly.

5. I do things that are apt to be accepted by \ one person and not accepted by others. ' ^ 6. I know exactly what is expected of me. 7. I receive an assignment without the manpower to complete it. 8. I receive incompatible requests from two or more people.

9. There are clear, planned goals and objectives for my ^ job. 10. I work with two or more groups that operate quite differently. 11. I have to buck a rule or policy in order to carry out an assignment. 12. I feel certain about how much authority I have

13. I work on unnecessary things. 14. Explanation is clear of what has to be done, v/

15. It is impossible for me to believe that chance or luck plays an important role in my life.

16. Sometimes I feel that I don't have enough control over the direction my life is taking. 17. Many times I feel that I have little influence over the things that happen to me.

18. There really is no such thing as "luck." 145

19. Becoming a success is a matter of hard work; luck has little or nothing to do with it. 20. Many of the unhappy things in people's lives are partly due to bad luck. 21. Most people don't realize the extent to which their lives are controlled by accidental happenings. 22. There is a direct connection between how hard I work and the rewards I get. 23. People's misfortunes result from the mistakes they make. 24. The idea that bosses are unfair to workers is nonsense. 25. It is not always wise to plan too far ahead because many things turn out to be a matter of good or bad fortune any how. 26. In my case getting what I want has little or nothing to do with luck. 27. Who gets to be the boss often depends on who was lucky enough to be in the right place first. 28. Many times we might as well decide what to do by flipping a coin. 29. Getting people to do the right thing depends upon ability; luck has little or nothing to do with it. 146 PART FOUR: LEADER

Instructions: Circle the letter that best indicates how often your immediate superior (always to never): 1. Treats all group members as his/her equals 2. Makes his/her attitudes clear to the group 3. Gives advance notice of changes 4. Tries out his/her ideas in the group 5. Is friendly and approachable 6. Assigns group members to particular tasks 7. Does little things to make it pleasant to be a member of the group 8. Encourages the use of uniform procedures 9. Makes sure that his/her part in the group is understood by the group members 10. Maintains definite standards of performance 11. Decides what shall be done and how it shall be done 12. Keeps to himself (or herself) 13. Is willing to make changes 14. Acts without consulting the group 15. Refuses to explain his/her actions 16. Asks that group members follow standard rules and regulations 17. Puts suggestions made by the group into operation 18. Schedules the work to be done 19. Looks out for the personal welfare of group members 20. Lets group members know what is expected of them APPENDIX C

ANALYSIS OF DEMOGRAPHIC VARIABLES

147 148

LISREL was used to test for the significance of the demographic variables in explaining variation in the research variables of interest. Selected LISREL output for the "null" model used in testing the demographics is presented on the following page. The particular model used for testing the demographics portrayed all of the research variables of interest as endogenous variables and all of the demographic variables as exogenous variables. The Beta matrix was left free to allow the research variables of interest to correlate. The Gamma matrix was the focal point for testing the significance of the demographic variables. By freeing certain elements of the Gamma matrix, the demographic variables were allowed to "load" on the research variables of interest independently and in a variety of combinations. Also, the demographics were allowed to "load" on individual research variables as well as on groups of research variables. None of the models allowing the influence of any of the demographic variables on any or all of the research variables were significant improvements over the null model presented. Thus, the demographic variables did not contribute toward explaining variation in the research variables. Accordingly, none of the LISREL models used in testing the research hypotheses included the demographic variables. 149

LISREL ESTIMATES (MAXIMUM LIKELIHOOD) BETA LOCUS STRUCT CONSID STRESS ATT-FORM ATT-INFM RUFI

L 0 0 0 0 0 0 0 0 0 0 0.0 0.0 S 1 094 0 0 0 0 0 0 0 0 0.0 0.0 C 0 250 0 726 0 0 0 0 0 0 0.0 0.0 S -1 088 •0 242 0 058 0 0 0 0 0.0 0.0 A-F -3 539 •0 408 •0 083 3 745 0 0 0.0 0.0 A-I 0 225 0 073 •0 065 0 064 0 445 0.0 0.0 R 10 644 2 263 •0 477 9 589 -0 875 1.163 0.0 GAMMA AGE EDCTN POSITION CAREER

LOCUS 0.0 0.0 0.0 0.0 STRUCT 0.0 0.0 0.0 0.0 CONSID 0.0 0.0 0.0 0.0 STRESS 0.0 0.0 0.0 0.0 ATT-FORM 0.0 0.0 0.0 0.0 ATT-INFM 0.0 0.0 0.0 0.0 RUFI 0.0 0.0 0.0 0.0 PHI AGE EDCTN POSITION CAREER

AGE 2.910 EDCTN •0.406 0.896 POSITION 1.775 •0.527 7.720 CAREER 1.873 •0.537 1.631 2.484 MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 571 DEGREES OF FREEDOM IS 999.71 (PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.791 ADJUSTED GOODNESS OF FIT INDEX IS 0.756 ROOT MEAN SQUARE RESIDUAL IS 0.141 APPENDIX D THE NULL MODEL

150 151

LISREL ESTIMATES (MAXIMUM LIKELIHOOD) LAMBDA Y ATT-FORM ATT-INFM RUFI

AFl 1 ,000 0 .0 0.0 AF2 1 229 0 ,0 0.0 AF3 1 279 0 ,0 0.0 AF4 0 864 0 ,0 0.0 AF5 1 019 0, 0 0.0 AF6 0 336 0, 0 0.0 AF7 1 107 0, 0 0.0 AF8 0 421 0, 0 0.0 All 0 0 1. 000 0.0 AI2 0, 0 0. 969 0.0 AI3 0, 0 1. 306 0.0 AI4 0, 0 1. 006 0.0 AI5 0, 0 1. 023 0.0 AI6 0, 0 0. 544 0.0 AI7 0, 0 1. 199 0.0 AI8 0. 0 0. 467 0.0 RUFIl 0. 0 0. 0 1.000 RUFI2 0. 0 0. 0 0.837 RUFI3 0. 0 0. 0 0.832 RUFI4 0. 0 0. 0 0.725 LAMBDA X LOCUS STRUCT CONSID STRESS LOCI 1 000 0.0 0.0 0 0 LOC 2 0 898 0.0 0.0 0 0 LOC 3 1 249 0.0 0.0 0 0 LOC 4 1 168 0.0 0.0 0 0 LOC 5 1 229 0.0 0.0 0 0 STRUCTl 0 0 1.000 0.0 0 0 STRUCT2 0 0 0.550 0.0 0 0 CONSIDl 0 0 0.0 1.000 0 0 C0NSID2 0 0 0.0 0.749 0 0 STRESSl 0 0 0.0 0.0 1 000 STRESS2 0 0 0.0 0.0 0 717 STRESS3 0 0 0.0 0.0 0 963 152

GAMMA LOCUS STRUCT CONSID STRESS ATT-FORM 0.0 OT^ oTo" oTo" ATT-INFM 0.0 0.0 0.0 0.0 RUFI 0.0 0.0 0.0 0.0 PHI LOCUS STRUCT CONSID STRESS LOCUS 0.195 STRUCT 0.216 0.974 CONSID 0.206 0.761 0 784 STRESS -0.258 -0.436 -0 372 0.380

PSI ATT-FORM ATT-INFM RUFI

0.852 0.626 2.449 TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.972 TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.993

MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 458 DEGREES OF FREEDOM IS 9 8 5.32 (PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.778 ADJUSTED GOODNESS OF FIT INDEX IS 0 744 ROOT MEAN SQUARE RESIDUAL IS 0 242 APPENDIX E THE ATTITUDES MODEL

153 154

LISREL ESTIMATES (MAXIMUM LIKELIHOOD) LAMBDA Y

ATT-FORM ATT-INFM RUFI

AFl 1.000 0.0 0.0 AF2 1.169 0.0 0.0 AF3 1.278 0.0 0.0 AF4 0.847 0.0 0.0 AF5 1.019 0.0 0.0 AF6 0.332 0.0 0.0 AF7 1.134 0.0 0.0 AF8 0.435 0.0 0.0 All 0.0 1.000 0.0 AI2 0.0 0.949 0.0 AI3 0.0 1.303 0.0 AI4 0.0 0.969 0.0 AI5 0.0 0.988 0.0 AI6 0.0 0.508 0.0 AI7 0.0 1.180 0.0 AI8 0.0 0.442 0.0 RUFIl 0.0 0.0 1.000 RUFI2 0.0 0.0 0.852 RUFI3 0.0 0.0 0.825 RUFI4 0.0 0.0 0.736

LAMBDA X LOCUS STRUCT CONSID STRESS

LOCI 1.000 0.0 0.0 0.0 LOC 2 0.898 0.0 0.0 0.0 LOC 3 1.249 0.0 0.0 0. 0 LOC 4 1.168 0.0 0.0 0.0 LOC 5 1.229 0.0 0.0 0.0 STRUCTl 0.0 1.000 0.0 0.0 STRUCT2 0.0 0.550 0.0 0.0 CONSIDl 0.0 0.0 1.000 0.0 C0NSID2 0.0 0.0 0.749 0.0 STRESSl 0.0 0.0 0.0 1.000 STRESS2 0.0 0.0 0.0 0.717 \j m \y 0.963 STRESS3 0.0 0.0 0 0 BETA ATT-FORM ATT-INFM RUFI

ATT-FORM 0.0 0.0 0.0 ATT-INFM 0.480 0.0 0.0 0.0 RUFI -1.093 1.187 155

GAMMA LOCUS STRUCT CONSID STRESS

ATT-FORM 0.0 0.0 0.0 0.0 ATT-INFM 0.0 0.0 0.0 0.0 RUFI 0.0 0.0 0.0 0.0 PHI LOCUS STRUCT CONSID STRESS LOCUS 0.195 STRUCT 0.216 0.974 CONSID 0.206 0.761 0.784 STRESS -0.258 -0.436 -0.372 0.380 PSI ATT-FORM ATT-INFM RUFI

0.873 0.449 1.540 TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.970 TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.993 SQUARED MULTIPLE CORRELATIONS FOR STRUCTURAL EQUATIONS ATT-FORM ATT-INFM RUFI

0.0 0.309 0.361 MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 455 DEGREES OF FREEDOM IS 882.03 (PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.793 ADJUSTED GOODNESS OF FIT INDEX IS 0.760 ROOT MEAN SQUARE RESIDUAL IS 0.167 APPENDIX F THE FITTED MODEL

156 157

LISREL ESTIMATES (MAXIMUM LIKELIHOOD) LAMBDA Y STRESS ATT-FORM ATT-INFM RUFI

STRESSl 1.000 0 .0 0 .0 STRESS2 0 .0 0.715 0 .0 0 .0 0 .0 STRESS3 0.966 0 .0 0 .0 AFl 0 .0 0.0 1 .000 0 .0 0 AF2 .0 0.0 1 .159 0 .0 0 AF3 .0 0.0 1 ,271 0 .0 0 .0 AF4 0.0 0,,84 5 0,. 0 0 .0 AF5 0.0 1,,01 2 0,, 0 0 .0 AF6 0.0 0, 337 0,, 0 0, .0 AF7 0.0 1. 156 0. 0 0, .0 AF8 0.0 0. 433 0. 0 0. .0 All 0.0 0. 0 1. 000 0. .0 AI2 0.0 0. 0 0. 951 0. ,0 AI3 0.0 0. 0 1. 310 0. ,0 AI4 0.0 0. 0 0. 972 0. 0 AI5 0.0 0. 0 0. 996 0. 0 AI6 0.0 0. 0 0. 508 0. 0 AI7 0.0 0. 0 1. 189 0. 0 AI8 0.0 0. 0 0. 443 0. 0 RUFIl 0.0 0. 0 0. 0 1. 000 RUFI2 0.0 0. 0 0. 0 0. 852 RUFI3 0.0 0. 0 0. 0 0. 824 RUFI4 0.0 0. 0 0. 0 0. 736 LAMBDA X LOCUS STRUCT CONSID LOCI 1 000 0.0 0.0 LOC 2 0 854 0.0 0.0 LOC 3 1 223 0.0 0.0 LOC 4 1 134 0.0 0.0 LOC 5 1 177 0.0 0.0 STRUCTl 0 0 1.000 0.0 STRUCT2 0 0 0.541 0.0 CONSIDl 0 0 0.0 1.000 C0NSID2 0 0 0.0 0.748

BETA STRESS ATT-FORM ATT-INFM RUFI STRESS 0.0 oTo oTo 0.0 ATT-FORM -0.682 0.0 0.0 0.0 ATT-INFM -0.141 0.434 0.0 0.0 RUFI 0.0 -1.083 1.192 0.0 158

GAMMA LOCUS STRUCT CONSID

STRESS -1.007 -0.225 0.0 ATT-FORNI 0.0 0.0 0.0 ATT-INFN1 0.0 0.0 0.0 RUFI 0.0 0.0 0.0 PHI LOCUS STRUCT CONSID

LOCUS 0.207 STRUCT 0.222 0.989 CONSID 0.207 0.761 0.786 PSI STRESS ATT-FORM ATT-INFM RUFI

0.019 0.702 0.439 1.548 TOTAL COEFFICIENT OF DETERMINATION FOR Y - VARIABLES IS 0.977 TOTAL COEFFICIENT OF DETERMINATION FOR X - VARIABLES IS 0.997 SQUARED MULTIPLE CORRELATIONS FOR STRUCTURAL EQUATIONS STRESS ATT-FORM ATT-INFM RUFI

0.951 0.201 0.319 0.359 TOTAL COEFFICIENT OF DETERMINATION FOR STRUCTURAL EQUATIONS IS 0.951 MEASURES OF GOODNESS OF FIT FOR THE WHOLE MODEL CHI-SQUARE WITH 454 DEGREES OF FREEDOM IS 848.54 (PROB. LEVEL = 0.000) GOODNESS OF FIT INDEX IS 0.799 ADJUSTED GOODNESS OF FIT INDEX IS 0.766 ROOT MEAN SQUARE RESIDUAL IS 0.127