Psychological Contract State, Employee Outcomes, Equity Sensitivity, Leadership Style and Performance of Public Water Service Providers in Kenya

Abstract

This study focused on psychological contract, employee outcomes, equity sensitivity, leadership style and performance of water public service providers (WSPs) in Kenya. The studies linking psychological contract state to organization performance are very few. The few studies indicate that there is no clear relationship between psychological contract state and organizational performance. Different from other studies, this study introduced employee outcomes as mediator and equity sensitivity and leadership styles as moderators. The main objective of the study was to determine the relationships between and among psychological contract, employee outcomes, equity sensitivity, leadership styles and organizational performance of the WSPs. More specifically, the study was set to establish effect of different combinations of predictor variables such as psychological contract state, employee outcomes, equity sensitivity and leadership style on the organizational performance. The study was founded on resource based theory of sustainable competitive advantage and social exchange theories. A conceptual model and hypotheses that guided this study were developed from the literature. The population of the study consisted of 100 water service providers companies (WSPs) in Kenya. The study used cross sectional survey design where data was collected at one point in time across the WSPs. The primary data was collected using a semi structured questionnaire. The secondary data on organizational performance was obtained from the Water Services Regulatory Board’s (WASREB) performance review of Kenya’s water service sector 2014. The respondents were the top and middle managers from departments and sections. Data was analyzed and interpreted based on descriptive statistics, correlations, linear, multiple and stepwise regression. The findings of the study comprised positive significant relationship between psychological contract and organizational performance; there was partial mediation effect of employee outcomes. The effect of psychological contract state on organization performance is direct and not indirect through employee outcomes as was hypothesized. Equity sensitivity did not moderate the relationships between psychological contract (PC) state and organizational performance. There was no moderation effect of leadership style on the relationship between psychological contract state and organizational performance. Finally, the joint effect of psychological contract state, employee outcome, equity sensitivity and leadership style on organization performance was supported. However, out of curiosity a post hoc analysis was performed on hypothesis two that was not confirmed in the initial analysis. This hypothesis is now confirmed. The results are presented in the table 5.1. There was positive significant relationship between employee outcomes and organizational performance. There was mediation effect of PC state in the relationship between employee outcomes and organizational performance. The equity sensitivity did not moderate on the relationships between employee outcomes and organizational performance. And the joint effect of psychological contract state, employee outcomes, leadership style, equity sensitivity and organization performance was supported. Managers may therefore use the findings of this study to improve the organization’s performance. The findings of this study will assist the practitioners in formulating policies and making decisions in the area of psychological contract, employee outcomes, leadership style, equity sensitivity and, organizational performance. Future researchers could apply structural equation modeling analysis methods for analysis instead of using step wise analysis. This will enable the testing of moderated mediation while at the same time address the measurement error which a major concern.