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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.17 No.4 pp.642-652
DOI : https://doi.org/10.7232/iems.2018.17.4.642

# Studying the Role of Organizational Climate and Organizational Commitment in Predicting Service Recovery (Case Study: Free Zone Border Market, Maku, West Azerbaijan)

Hossein Rahimi Koloor*
Department of Management and Economic, University of Mohaghegh Ardabili, Ardabil, Iran
* Corresponding Author, E-mail: hrk6809@gmail.com
November 27, 2017 July 20, 2018 September 17, 2018

## ABSTRACT

The present study investigates the role of organizational climate and organizational commitment in predicting employees’ service recovery. The aim of this study is to develop a conceptual model to determine the relationship between organizational climate and organizational commitment in employees’ service recovery in Free Zone Border Market, Maku-West Azerbaijan, using survey and questionnaires. Data is collected among Maku Free Zone employees who are 210 people selected by simple random sampling method and SPSS and LISREL statistical software is used for analysis. The results of testing research hypotheses in structural equation modeling showed that there is a significant relationship between research variables. The findings of this study show that organizational climate and organizational commitment have a positive impact on service recovery. The results show that the proper use of organizational climate and organizational commitment guides the organization towards better and more appropriate service recovery.

## 1. INTRODUCTION

Some management theorists do not consider the concept of service recovery (SR) as a new concept, and the concept has gotten an official form by the academic members on the one hand and managers of organizations and businesses on the one hand. By focusing on organizational management and the quality of offering services to the clients of the organization, they have considered zero defects approach in relation to the delivery of goods and have noted that completing and administrative processes of services cannot be flawless (Homburg and Fürst, 2005).

Given that providing flawless services is almost impossible, so effective recovery of defective service to provide customer satisfaction, elimination of negative word of mouth, and improvement of the performance of frontline employees is essential (Kazemi and Barid, 2010). They highlighted the fact that failure process in providing services occurs when services are offered in flawed methods, during which much time and money is spent in an irrational way, and the organization gets out of the competitive field. However, improvements in the ways of providing services makes the possibility of using facilities in a logical way and the nature of services related to that organizational set can create greater transparency among the customers by providing adequate and reasonable services (Othman et al., 2013).

The purpose of service recovery is customer satisfaction and addressing the situation where the customer does not face shortcomings in obtaining any product or service, in which case, service recovery strategy can take effective steps to change the flaws happened by using methods such as comments on the question to the customer, apologizing, empowering employees for update solution of the problems, compensatory steps for loss or damages or other procedures, and observing the propriety and politeness in this process (Baker et al., 2008).

Service recovery issue is as one of the most important issues in organizational management discussions. Concerning border markets and creating them for dynamic economy of border areas are of the issues that pave the way for the development of cross-border transactions in a lawful way in the field of management and organizational environment, so that by establishing healthy and continuous business communication with neighboring countries, the existing capacity in border areas are used in a proper way. This means that if the organizational environment of the border markets is to be developed (Zarghani et al., 2014), they should be consistent with environmental changes and new requirements and keep pace with the changing environment and change theirs structure to fit the new needs to supply their own needs according to the changes created (Mohammad Kazemi et al., 2013). One of these needs is how to provide services and their recovery in case of any shortcomings and defects by providing sufficient explanation on the difficulties of marketplaces, apologizing, empowering of employees to solve the problem at the moment, providing compensation or other methods of doing so, and staying polite in compliance with the relevant process (Hess et al., 2003). Processes such as focusing on handling customer complaints and effective justice policies in proceedings of customer complaints could change the affected customers to become loyal customers (Kim et al., 2009).

Organizational climate, which plays an important role in molding interaction and behavior of employees and influences their perceptions, leads to firms’ preparing the possibility to think more freely in a good organizational climate so that the staff can share their ideas openly with others (Chen and Huang, 2007). According to Jöreskog and Sörbom, (2018) an atmosphere will be helpful and flexible in the organization that manages and guides service strategy, service support, training, incentives and recognition, and logistic protection based on customer (Schneider and Barbera, 2014) and of course commitment- based management for quality of service will be an important determinant in work environment according to which, organizational commitment and the feeling of the staff towards the organization will have considerable effects on the performance of SR (Rod and Ashill, 2010). If no attention is paid to SR, frustration and failure in providing services will lead to getting out of business climate (Othman et al., 2013). Given the importance of organizational climate in SR and improving its process, if there were an organizational climate with conflict, hostility and weaknesses, organization would face serious challenges and the process of improvement of services would face serious problems (Allen and Toder, 2004). Organizational climate, which refers to employees’ understanding of the environment in which are working, can make evolutions in SR status by referring to the status of group spirit, harassment, interest and intimacy of employees along with considerations, getting distant, influence and dynamism, and emphasis on creating characteristics related to managers (Koohi Rostamkalaee et al., 2013).

Besides the good organizational climate, the process of organizational commitment and commitment quality of employees can affect the quality of dealing with weaknesses in providing service and SR with high-speed. Commitment quality is considered as an aspect of individual recognition in the organizational situation, and each employee with a high level of commitment can fix and supply organizational activities and orientation towards service quality. Qazani et al. (2018) define organizational commitment as a strong belief through which employees accept organizational goals and values and work hard in assigned activities within the organization and have a strong desire to maintain their membership in the organization (Zangene-Tabar et al., 2013).

The significant relationship between organizational commitment and service-related climate show that higher organizational commitment can affect behaviors related to people and lead behavioral intentions regarding the provision of services in the organization towards being positive (Poulin et al., 2006) and to an extent that normative commitment is strengthened in an organization and is at a high level, the level of service performance changes accordingly (Kansal, 2012). The impact of affective commitment on organizational behavior, quality of hospital services (He, 2008) and continuing commitment strengthens the relations between staff and customers and leads to improvement of quality of service (Lotfi and Vidyasagar, 2017). In this study, it is tried to determine whether organizational climate and organizational commitment have a role in predicting service recovery in Free Zone Border Market, Maku-West Azerbaijan or not.

## 2. LITERATURE REVIEW

### 2.1. Service Recovery

Services are considered as economic activities that based on effecting requested changes in the subject of the receiver of the change or on behalf of it, at specific times and locations, some benefits and bonuses are created for customer (Lovelock and Wright, 1999).

The word recovery was first used in service context by British Airways airline in an advertisement campaign entitled “First Customer” (Samadi et al., 2008). The concept of SR is considered as an issue related to the service industry that is the primary reason for customer satisfaction and has a direct relationship with loyalty and highprofit of the organization (Krishna et al., 2011). SR is considered as the attempt to provide services in response to service flaws, which contains actions and activities that service organizations and their staff perform so that the customers who have experienced shortcomings associated with service performance fix, modify and compensate these shortcomings.

The purpose of SR is making the client satisfied, and SR can be in form of repayment, price discount, updating the services, products and free services, apology, and admitting the mistake (Krishna et al., 2011). Moreover, SR is defined as measures designed to solve problems, change negative attitudes of dissatisfied customers, and ultimately to keep these customers.

Swanson and Hsu (2011) defined SR as an evaluated and planned process to return affected customers, who had faced failure in meeting the expectations, to the state of satisfaction with the service or products of the firm. SR is introduced based on three types of justice (methods of implementation and enforcement): procedural justice (the fairness of the process clarity), interactional justice (interactions and interpersonal behavior) and distributive justice (focus on the perceived justice from the result of service confrontations) and recently informational justice (explaining and informing the consumer after the failure of services) is added to these three. Boshoff (2017) have suggested five dimensions for SR that include: apology, empathy, immediate repair or correction, symbolic compensation and pursuing. Krishna et al. (2011) have expressed the process of SR in the four steps of confession, explanation, proper and correct apology, and compensation for defects or deficiencies of services.

Boshoff (2017) studies thirteen components related to SR that include time, compensation, apology, fair correction, empathy, taking the responsibility for it, sustainability of pledge, feedback, empowerment, access, tangible things, staff attitude, and explanation and finally after confirmatory factor analysis, six components including communications, control, feedback, explanation, and tangible things are identified as the main characters of SR (Boshoff, 2017).

Krishna et al. (2011) have introduced seven steps for the process of SR that include acknowledging the problem happened, empathy with the client and from his point of view, apology just by saying sorry, customer property and the related issue, solving customer problem, warranty that it will not be repeated, and compensation for the deficiency (Krishna et al., 2011).

Lewis and Spyrakopoulos (2001) have considered SR strategies as explanation, correction, exceptional behavior, apology, compensation, redirection and doing nothing.

### 2.2. Organizational Climate

Climate has been defined as Gestaltian perception of the staff of what the organization can be in terms of behaviors, policies, practices, procedures and rewards (Schneider and Barbera, 2014). Lewis and Spyrakopoulos (2001) suggested the concept of organizational climate for the first time in 1939. Randhawa and Kaur, (2015) defined organizational climate as the relative stable internal environment of the organization that 1) is experienced by its members, 2) influences their behavior, 3) and can be described in terms of a specific set of values of the organization.

Most researches have consensus that organizational climate is a complex, multilevel and multidimensional phenomenon that is obtained based on the perceptions of employees due to their experience in the organization, which is constant over time and is broadly shared within an organizational unit. Researchers have conceptualized construct organizational climate through distinguishing between organizational climate and psychological climate. In fact, the psychological climate level is studied at the individual level, whereas organizational climate is studied at the organizational level. These two aspects of the climate (organizational and psychological) describe different and multi-dimensional aspects of employees’ perceptions in the organization based on the experiences their (Hammami et al., 2013).

Organizational climate represents organizational cultural status, and flexibility and proper and efficient management in organization space cause satisfaction, innovation, motivation and learning and have tangible effects on employee motivation in such a way that a good working climate promotes work ethics, loyalty and productivity of employees (Permarupan et al., 2013).

Schneider and Barbera (2014) have defined organizational climate as a set of attitudes and beliefs related to an organization whose members are collectively involved as a whole.

In fact, organizational climate refers to the distinctive multidimensional quality of an organization that is the product of synergistic mixture of several visible elements related to human, communicative, and structural dimensions of the organization (Carlucci and Schiuma, 2015). By developing the concept of organizational climate as the subjective nature or quality of the institutional environment, Shodja (2010) do not consider it as a one-dimensional concept and have it in six dimensions: structure, standards, accountability, recovery, support and commitment.

Permarupan et al. (2013) considered the constituting elements of organizational climate as transparency (Everyone in the organization knows what is expected of him), standards (challenging, but attainable goals are set) responsibilities (staff has specific authority to carry out their duties), flexibility (there are no unnecessary laws, policies, and guidelines), rewards (staff are known and rewarded for good performance) and group commitment (people feel proud of being dependent on the organization) (Permarupan et al., 2013).

### 2.3. Organizational Commitment

The root cause of the coinage of the organizational commitment concept that refers to the human relationships movement when it was found that people have some feelings towards the organization including the identification with the objectives of their workplace. Since the literature related commitment is quite extensive, before the 1970s, there had been fundamental differences on defining and measuring engagement structure so that some scholars have defined commitment as the tendency to remain in the organization. Some others have defined commitment in terms of identity seeking or the extent to which employees identify themselves with the goals and organizational values Balfour and Wechsler (1996) identify commitment in terms of loyalty, job involvement, job involvement, job commitment, and moral commitment.

Organizational commitment is associated with the relationship between employees and organization or loyalty to the organization and identification with it, and Johnson (2015) have defined organizational commitment as staff loyalty to the organization, tend to create efforts on behalf of the organization, congruence of goals and values of the staff with the organization and their willingness to maintain their membership there.

Scrima et al. (2015) have defined organizational commitment as a psychological status that has three components: affective, normative and continuance. Affective commitment includes employees’ emotional attachment to identification with the organization and involvement in organizational activities with a positive feeling. Continuance commitment includes a commitment that is based on valuing the organization and employee is involved in organizational life and has high loyalty to the organization, and normative commitment includes the feelings of people on the need to stay in the organization.

According to the view of Balfour and Wechsler (1996), organizational commitment can be identified with three components- replication, dependency and exchange. In replication, the staff coordinates with the organization's goals and values; in dependence, employees in the organization have a sense of belonging and allegiance to each other; and exchange, based on employees level of attachment to the organization, increases when the organization identifies the participation of employees in the organization affairs and indicates its importance thus ensuring the practical areas to encourage employees.

Mayer and Shoorman (1998) considered organizational commitment in two dimensions: continuous commitment; meaning the desire to stay in the organization, and value commitments; meaning extra effort for the organization. The triple dimensions of Meyer and Allen are principally different based on the mindset that relates the individual to the organization, but the behavioral result of all three components of commitment are similar because they are related to working in the organization, whereas in Meyer and Shoorman’s model, it is assumed that continuance commitment associates with the decision to stay or leave the organization, and value commitment is related to extra efforts in order to achieve the objectives of the organization (Mayer and Schoorman, 1998).

#### 2.3.1. Theories Explaining the Relationship between Organizational Climate, Organizational Commitment, and SR

Schneider and Barbera (2014) have considered management and leadership associated with any organization useful with making changes in the organizational status and organizational climate of services when service climate is not optimal, because of the crucial role of manager as one of the important elements of organizational climate in the quality of services in terms of penetration, dynamic, and functional consideration of the components of the organization and emphasis on more fundamental production. On the other hand, when the organizational climate is encouraged to increase the quality of services, committed and effective management can be a turning point in the form of services and their provision. When the service climate is not optimal and organizational leadership is not effective, staff service performance will reduce, but when services are recovered under the influence of a positive organizational climate, task-oriented and people-centered measures, and behaviors of moral leadership are compensated due to the negative atmosphere of services. Smith et al have proposed an integrated approach on recovery of services during which a sociotechnical based system is designed for the establishment of links between SR systems, SR-based organizational climate, abilities and actions of employees, and improvement in performance. In this approach, regular planning on specialist human resources at the organization and then transfer of this experience to the manner of services, quality of service and its recovery is emphasized (Smith et al., 2010). Glisson and Green (2011) emphasize the importance of organizational climate and its crucial role in offering services: the organizational climate in connection with employee workspace reveals the quality of service, and different types of services and business experienced by staff (Glisson and Green, 2011). In explaining SR Babakus et al. (2001) have focused on organizational commitment, especially affective commitment and claimed that commitment can make the quality of services meaningful (Babakus et al., 2001). Rod and Ashill (2010) who have examined the relationship between management committed to service quality and performance of SR through intermediary variables of organizational commitment and job satisfaction concluded that organizational culture based on service-orientation strong-customers should strengthen the education, empowerment, service orientation, and employee reward in relation to customer time, and by increasing organizational commitment and job satisfaction as mediation of upgrading the effects of primary variables enhance their operational status (Rod and Ashill, 2010).

Evanschitzky et al. (2011) consider commitment as an issue in the relationship between the buyer and the seller that manages the sustainability and continuation of that relationship. In their opinion, successful managing of the primary complaint of the customer depends on their motivation in facing this kind of reaction from the customers. In this approach, affective commitment can facilitate the process after complaints by reviving services (Evanschitzky et al., 2011). Results of the study by Samadi et al. (2008) examining the relationship between the aspects of service failure and service recovery strategies with behavioral intentions strategies show a significant correlation (Samadi et al., 2008). Mardani and Shahraky (2010) have come to the conclusion that good organizational climate, in comparison with poor organizational climate, can affect the provision of services (Mardani and Shahraky, 2010). Manning et al. (2012) have concluded that the existence of good organizational climate can change the process of service space and guide them in the right direction (Manning et al., 2012). Dhar has came to the conclusion that organizational commitment is effective on providing service and their quality (Dhar, 2015). The findings of Hocutt et al. (2006) have shown that consumers who do not mention anything about the service failure create the biggest problem to service firms, and turn into so called silent killers (Hocutt et al., 2006).

## 3. CONCEPTUAL FRAMEWORK OF THE STUDY

By reviewing literature and the results of previous research, the theoretical model of the study is composed of the impact of organizational climate and organizational commitment on SR and the conceptual model is based on the key role of organizational climate, which is shown in Figure 1 (Manning et al., 2012;Glisson and Green, 2011;Smith et al., 2010; Schneider and Barbara, 2014) and organizational commitment (Dhar, 2015;Evanschitzky et al., 2011;Rod and Ashill, 2010;Babakus et al., 2001) in staff SR.

### 3.1. Research Hypotheses

Given the past history and the conceptual model, the research hypotheses are expressed as follows:

• 1. Organizational climate is involved in predicting SR services in Maku Free Zone Border Market.

• 2. Organizational Commitment is involved in predicting SR services in Maku Free Zone Border Market.

### 3.2. Research Methodology

The method used in this research is survey and research variables are measured by a standard questionnaires. The target population included all employees of Maku Free Zone who were 250 people in 2015-2016. Sampling method was simple random and using Formula (1) which is used as the study population is limited:

$n = N σ 2 Z x z 2 e 2 ( N − 1 ) + σ 2 Z x z 2 = 250 × 0.67 × ( 1.96 ) 2 ( 0.5 ) 2 ( 250 − 1 ) + 0.67 × ( 1.96 ) 2 = 201$
(1)

$δ = max ( x i ) − min ( x i ) 6 = 5 − 1 6 = 0.667$
(2)

In this formula, the critical value of standard normal variable for the sample size in the table is 1.96 (z = 1.96), confidence level is 95% (1-α), negligible error is 0.05 (ε = 0.05) and to determine the standard deviation (σ), since the scale of questions was five-option, Relationship (2) is used which is equal to 0.67 and finally by using Relationship (1), sample size has been calculated as 201 people selected using simple random method. Estimation of sampling formula of the study shows a total of 201 people and to overcome the effects of missing and incomplete questionnaires and undeclared items by respondents on results and to increase the level of probable accuracy, study sample was increased from 201 to 210 and finally 210 questionnaires containing detailed and analyzable were diagnosed for this study.

### 3.3. Data Gathering

In the first stage, to collect data, by doing library and document research, the relationship between variables and their dimensions were identified, and in the second stage, questionnaire was used to evaluate hypotheses and test the model.

To measure organizational climate, some questions in ordinal measurement level with Likert scale by using Halpin and Kraft’s questionnaire (Kenney and Rentz, 2017;Koohi Rostamkalaee et al., 2013) in the form of eight standard components and for each component, 4 questions and a total of 32 questions were used. In this study, organizational commitment has three components: affective normative and continuous commitment, and there are eight questions for each and a total of 24 questions in the Meyer and Allen standard questionnaire (Scrima et al., 2015). Moreover, SR measurement was conducted using Lewis and Spyrakopoulos (2001) SR strategies composed of seven aspects of explanation, correction, exceptional behavior, apology, compensation, redirection, and doing nothing (Lewis and Spyrakopoulos, 2001) used in the questionnaire. The questionnaire used in this research is derived from the standard questionnaires designed for organizational climate, organizational commitment and SR, which has a total of 51 questions after removing 20 questions in the pre-test stage, and the questions related to organizational climate of the spatial domain on standard questionnaire are localized, removed and modified and designed based on five-point Likert scale, and after collecting data, the questionnaires filled out were reviewed and then after encoding and extracting, the data were analyzed by using statistical and graphical software LISREL 8.7 and SPSS22.

### 3.4. Validity and Reliability of the Study Tool

To verify the construct validity using LISREL software and for confirmatory factor analysis, elements of both endogenous and exogenous groups for organizational climate, organizational commitment and service recovery factors were identified that were in accordance with the theoretical logic in connection with each factor and the entire structure affirming the factors identified in the theoretical foundations. Based on the data in Table 1, goodness of fit indices in measurement models are good for all variables of the model. It should be noted that in the first order factor analysis for organizational climate structure, five observable variables were removed from measuring model due to low and non-significant factor loadings in first order factor analysis and non-significant t value and the number of questions reduced from 24 observable variables of organizational climate to 19 observable variables. Moreover, for organizational commitment, three observable variables with t values, a number between -1.96 and 1.96, were not significant at 0.95 confidence level and were removed from measurement model for the structure of organizational commitment and ultimately number of questions from 14 observable variables for organizational commitment reduced to 11 variable observables. This analysis for SR construct on the same number of observable variables (13 questions) had a proper goodness of fit model, and based on fit criteria, there was no need to remove questions. These actions were based on the t value calculated in accordance with standard 1.96, load coefficients of communication paths between observable variables with latent variables was larger than this value indicating that these models were finalized after modification operations and then using modification indices to fit the data with theoretical models of each of the structures. Table 2

Amounts related to the model of second order construct validity measurement analysis of t value show that as the values of each observed variable associated with latent variables is not a number between -1.96 and 1.96, at a 0.95 confidence level the numbers are significant (Hoyle, 1995) and the measurement model for research structures, with 19 observable variables and seven latent variables for organizational climate, 11 observable variables and three latent variables for organizational commitment, 13 observable variables and seven latent variables for SR construct is significant.

Reliability is about the stability of a measure, and is inversely related with a degree to which a measure is affected by random error. The most practical measure of internal consistency is Cronbach’s alpha (Danaeifard et al., 2009). The index is based on responses given by the staff in Maku Free Zone Border Market and is over 0.84 indicating the proper reliability of questionnaire and the relatively high level of compatibility of questions with each of the variables in terms of the reliability.

### 3.5. Data Analysis

In this study, after studying the theories of the research, the most important variables that could be useful for LISREL modeling at a total of three latent variables including organizational climate variables (JAVESAZ) and organizational commitment (TAHASAZ) as latent exogenous variables and SR variable (EHYAKHET) as endogenous latent variables were designed in the model. According to T coefficients shown in Figure 2, it is clear that the path coefficients out of the organizational climate (JAVESAZ) and organizational commitment (TAHASAZ) are greater than t value (1.96) are (3.78 and 4.28 respectively). In order to ensure the existence or absence of a causal relationship between variables and to determine the appropriateness of the observed data with conceptual models. Main research hypotheses were tested using structural equation model that by referring to Figure 2 and as the significance numbers of the relationship between these variables were not between 1.96 and 1.96 not, they were confirmed, which means organizational climate and organizational commitment play a role in predicting SR in Free Zone Border Market, Maku and this role for being predictive, by referring to Figure 3, is 0.67 for organizational climate and 0.46 for organizational commitment. According to the results of data analysis on the relationship between the type of the relationship between these variables, it can be stated that the path coefficient is (0.67) and (0.46) and t value (3.78), (4.28.) and these values are greater than the critical value (-1.96 and 1.96), and thus the main hypothesis is significant at 0.05 level and acceptable. Model fit indices show suitability of measurement model of the related variables because the ratio of chi-square to the degree of freedom is 2.43 and less than the allowed amount 3 and the amount of root mean square error of approximation (0.045) is smaller than 0.10. Moreover, other indices show the fitness of the model and offers good fit to the model and has the greatest match with the data. Table 3

## 4. CONCLUSION

To perform a reliable prediction of SR change status, services under the influence of organizational commitment and climate in this study, with the aim of designing a structural equation modeling, a model was designed and tested for regulating theoretical thinking about the role of organizational commitment and climate in SR. The results of modeling assessment confirmed the role of organizational commitment and climate in explaining SR; and organizational climate with 67 percent and organizational commitment with 46 percent power of influence on SR have been able to confirm their role and explanation power among employees of Maku, Free Zone Border Market, in West Azerbaijan and confirmed theoretical approaches and experimental backgrounds used in this study. The results of this model show that if the market environment in terms of climate and organizational commitment are favorable, reliable grounds can be formed for doing things related to servicing better and fixing and recovering them on any shortcoming and failing to manage the enterprise environment in providing services to clients regarding the level of commitment to the marketplace. So it is recommended that by raising the level of cooperation between employees, and strengthening team spirit, the possibility is created so that through respect to each other and interests in the work environment, employees create a healthy climate for themselves and others, so as peripheral facilities necessary to better solve the problem of the referees are provided based on friendly cooperation of the staff and patrons. Organization management as a key element will be favorable in the regulation of relations between the staff in a peaceful and cooperative environment, because this favorable organizational climate and organizational commitment create a strong feeling of belonging to the organization and emotional attachment in employees and make them see it as a part of their life space and try to solve any problem and shortcoming created in quantity and quality of services in cooperation with others in a friendly climate based on systematic commitment.

## Figure

Conceptual framework.

The values of t statistic for structural equation modeling of SR.

The values of standard value statistic for structural equation of SR.

## Table

Measures of goodness of fit for measuring variables evaluated in the research

The reliability coefficients of research variables

Goodness of fit indices of structural equation modeling

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