The Interplay Between Employee and Firm Customer Orientation: Substitution Effect and the Contingency Role of Performance-Related Rewards

This paper identifies and explains a potential tension between a firm's emphasis on customer orientation (CO) and the extent to which employees value CO as a success factor for individual performance. Based on self-determination theory and CO implementation research, the authors propose that firm CO may represent both autonomous and controlled motivations for CO, but that employees’ CO is more strongly linked to individual performance when employees experience solely autonomous motivation. Hence, the authors expect a substitution effect whereby the link between employees’ CO and their performance is weaker when firm CO is high. Furthermore, the authors examine a boundary condition for the previous hypothesis and propose that performance-contingent rewards have a positive effect on the internalization of the extrinsic motivation stemming from firm CO. Two multilevel studies with 979 employees and 201 top management team members from 132 firms support these hypotheses. Against previous research, these findings offer a new perspective on the effectiveness of CO initiatives, propose employees’ motivational states as the theoretical explanation for the heterogeneity in the link between employee CO and performance, and reappraise the role of performance-contingent rewards in CO research. Managerial implications for the effective implementation of customer-oriented initiatives within firms are provided