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Determinants of business student satisfaction and retention in higher education: applying Herzbergs two-factor theory
Oscar W. DeShields Jr
California State University, Northridge, California, USA

Ali Kara
College of Business Administration, Pennsylvania State University York Campus, York, Pennsylvania, USA, and

Erdener Kaynak
School of Business Administration, Pennsylvania State University at Harrisburg, Middletown, Pennsylvania, USA

Abstract
Purpose This paper focuses on the determinants of student satisfaction and retention in a college or university that are assumed to impact students college experience. Design/methodology/approach Using empirical data and Herzbergs two-factor theory, a modied version of the questionnaire developed by Keaveney and Young was administered to approximately 160 undergraduate business students at a state university in South Central Pennsylvania. Using path analysis, the hypothesized effects were tested empirically by incorporating a comprehensive set of independent variables and self-reported experiential assessments to predict experience, which in turn related to student satisfaction. Findings The results indicate that the path coefcients from faculty and classes to students partial college experience are consistent with the assumption that these are key factors that inuence student partial college experience. Also, the path coefcient from student partial college experience to satisfaction was consistent with Herzbergs two-factor theory. In addition, students who have a positive college experience are more likely to be satised with the college or university than students who do not have a positive college experience. Research limitations/implications By focusing on antecedents of student satisfaction, colleges and universities can align their organizational structure, processes and procedures to become more customer-oriented. Small sample size and self-explicated retention data are the limitations of this study. Practical implications It is recommended in this study that the changing nature of the higher education marketplace encourages college administrators to apply the customer-oriented principles that are used in prot-making institutions. Originality/value Using a satisfaction model and a comprehensive set of independent variables and self-reported experiential assessments to predict experience, this paper provides empirical ndings to understand student satisfaction in higher education institutions. Keywords Higher education, Students, Customer satisfaction, Customer orientation Paper type Research paper

International Journal of Educational Management Vol. 19 No. 2, 2005 pp. 128-139 q Emerald Group Publishing Limited 0951-354X DOI 10.1108/09513540510582426

Introduction Higher education institutions are increasingly recognizing that higher education is a service industry, and are placing greater emphasis on meeting the expectations and needs of their participating customers, that is, the students. This becomes even more important in those states where university budgets utilize a tuition-based model. The rapid expansion of colleges and universities, and signicant increases in college education costs combined with demographic shifts in the population, force colleges to think differently about the role of student satisfaction for their survival (Kotler and Fox, 1995). Furthermore, intense competition in todays competitive educational market forces universities to adopt a market orientation strategy to differentiate their offerings from those of their competitors. Similarly, higher educational institutions in the US are operating in a competitive marketplace. Thus, they need to understand their target markets (i.e. students, external stakeholders of different types), assess the target market needs, modify their offerings to meet those needs, and thereby enhance customer satisfaction by delivering superior quality services (Keegan and Davidson, 2004). Even though the successful completion and enhancement of students education are the reasons for the existence of higher educational institutions, college administrators tend to focus disproportionately more time on programs for attracting and admitting students rather than managing enrollments (Zemke, 2000). Similar to the importance of satisfying customers to retain them for prot-making institutions (Anderson and Sullivan, 1993), satisfying admitted students is also important for student retention. Statistics indicate that more than 40 percent of all college entrants leave higher education without earning a degree, 75 percent of these students drop out in the rst two years of college, and institutions can expect that 56 percent of a typical entering class cohort will not graduate from that college (Tinto, 1975, 1993). More recent statistics indicate that 26.4 percent of freshmen do not return for the following fall semester and 46.2 percent of these students do not graduate from college (Reisberg, 1999). Also, higher educational institutions that are heavily populated by commuter students have higher dropout rates, while institutions with strong residential dormitory programs have lower drop out rates (Baldridge et al., 1982). Therefore, it might be argued that dissatised students may cut back on the number of courses or drop out of college completely. Hence, the satisfaction to intention to retention link for students in higher education should be studied and carefully managed. This paper focuses on the determinants of student satisfaction and retention in a college or university that are assumed to impact the business student college experience. Studies that examine student satisfaction in higher educational institutions from a more customer-oriented perspective add additional dimension to the educational planning activities of colleges and universities. Therefore, the objective of this study is to investigate the determinants of student satisfaction and retention in higher educational institutions. Using empirical data and Herzbergs two-factor theory as a framework, we investigate student satisfaction in college setting (Herzberg et al., 1967). To measure student satisfaction, we used a modied version of the model of Keaveney and Young (1997), which incorporates a comprehensive set of independent variables and self-reported experiential assessments to predict experience, which in return is related to student satisfaction.

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Higher education marketplace Marketplace dynamics are forcing business schools around the world to re-examine their structures and business strategies, and the processes employed to deliver value adding quality education. Past studies (McKendall and Lundquist, 1997; Kotler, 2003) documented that the number of students enrolling in US business schools nationwide has leveled off or declined and new competitors are entering the higher education market continuously. Corporations are beginning to offer their own MBA degrees, and online virtual universities are starting to recruit students forcefully who would normally enroll in a traditional MBA program (Peters, 1990). The challenges facing US business schools are now mimicking those faced by US corporations: the higher impact of advanced technology, discerning consumer demand, the ever-increasing non-traditional student population, the changing face of educational delivery methods, tougher competition and shrinking markets in certain subject areas and regions of the country (Voss, 1993). The environment that higher educational institutions have operated in has changed dramatically over the last several decades. Universities and colleges of all sizes in the USA have taken a proactive approach in dealing with the educational market realities. For instance, tuition-free state colleges and universities rapidly raised tuition charges as federal and state student aids dropped signicantly due to a bad economic climate in the USA. Technology has improved the range of teaching and learning tools while further raising the cost of higher education. All these issues, coupled with the huge and diverse American higher educational system, which includes institutions striving to maintain or increase enrollments, improve program quality and increase donations and grants, place higher education institutions into a marketplace where signicant challenges as well as lucrative market opportunities lie ahead. Even though satisfying the wants and needs of customers is not a new organizational concept for these institutions (Cutlip, 1971), customer orientation has been underemphasized in colleges and universities compared to prot-oriented organizations. However, the increased turmoil in the higher education marketplace may force colleges and universities to utilize a more customer-oriented philosophy in delivering their services, and those who understand these principles will have a better chance of achieving their objectives more effectively (Kotler and Fox, 1995). Past research consistently demonstrates that it costs more to attract a new customer than it does to retain an existing customer (Gemme, 1997). As in the case of customers for commercial institutions, student retention may be linked to customer satisfaction. Even though one might hesitate to call students customers because of the student teacher relationship, this still does not change the fact that without students, there would be no need for colleges, which means not only a drop in tuition revenues, but also that colleges would no longer have clients to receive the classes, counseling, and other services that they were established to provide. Hence, the need to manage college enrollments from the point of initial student contact to the point of graduation has become increasingly important (Seymour, 1993). For example, students who complain and are responded to immediately, even if the response is not favorable, can actually become more loyal than students who appear to be satised without complaints (Kotler and Fox, 1995).

Student satisfaction and retention model The majority of the existing customer management research has not focused on methodologies for modeling the customer life cycle. A recent study by Bolton (1998) explores the relationships between customer retention, intentions and satisfaction. This study argues that changes in customer satisfaction can have important nancial implications for the organization because lifetime revenues from an individual customer depend on the duration of his/her relationship, as well as the dollar amount spent across billing cycles. Also, according to Seymour (1993), developing many happy satised customers, whether they are students, parents of students, alumni, or company and government employers, should be a primary goal of higher education. Thus, focusing on enhancing customer satisfaction at colleges and universities is crucial in developing customer value. Earlier student retention studies in higher educational institutions have focused on academic ability as the predictor of retention. However, these studies reported that academic performance could only account for half of the variance in dropout rates (Pantages and Creedon, 1978). Also, a growing body of research suggests that the social adjustment of students may be an important factor in predicting persistence (Gerdes and Mallinckrodt, 1994; Mallinckrodt, 1988). These studies argue that integration into the social environment is a crucial element in commitment to a particular academic institution (Spady, 1970; Tinto, 1975). In addition to actual adjustment, researchers discovered that attitudes formed before enrollment were an important predictor of attrition (Baker et al., 1985). Tinto (1982) formulated a student integration theory of persistence or retention based on the relationships between students and institutions. He argued that retention involves two commitments on the part of the student. The rst commitment is the goal commitment to obtain a college degree, and the second is the decision to obtain that degree at a particular institution (institutional commitment). Overall, the combination of the students goal and institutional commitments affected retention at a particular institution. Under this perspective, it is important to match the students motivation and academic ability and the institutions ability to meet the students expectations. In this study, we attempt to test a part of the model and focus on the links between faculty, advising staff, and classes. We consider these factors critical in inuencing students experience with a college/university, which in turn impacts student satisfaction. Therefore, we decided to use a modied version of Keaveney and Youngs (1997) model, which considers the impact of unique set of variables to explain part of the college experience in higher educational institutions on student satisfaction (Figure 1). Herzbergs two-factor theory Job satisfaction and motivation have been widely investigated in many job situations and against many different theoretical formulations. Frederick Herzbergs motivation-hygiene factor theory, although considered non-traditional when it was introduced in 1959, has become one of the most used, known, and widely respected theories for explaining motivation and job satisfaction. According to Herzbergs two-factor theory (Herzberg et al., 1967), there are two distinct sets of factors for job satisfaction and job performance in organizations. One set, labeled satisers or motivators, results in satisfaction when adequately

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Figure 1. Partial model of student satisfaction and retention

fullled. The other set, labeled as dissatisers or hygiene factors, causes dissatisfaction when decient. The motivators are typically intrinsic factors: they are part of job content and are largely administered by the employee or (in this case) the student. The hygiene factors are extrinsic factors and are under the control of the supervisor or someone other than the employee or student. The important point here is that Herzbergs theory did not dene satisfaction and dissatisfaction as being at opposite ends of the same continuum. The opposite of satisfaction is not dissatisfaction, but no satisfaction. The opposite of dissatisfaction is not satisfaction, but no dissatisfaction. The extrinsic factors affect job satisfaction and if not adequately fullled can cause dissatisfaction, even if the motivating factors themselves are addressed satisfactorily. In applying Herzbergs theory to this study, faculty performance and classes are directly related to the outcome from a college experience and may be considered motivators or satisers (e.g. growth and achievement). On the other hand, the performance of advising staff may be considered similar to hygiene factors or dissatisers that may cause dissatisfaction but not satisfaction (i.e. an environmental factor). While the absence of good advising staff performance may lead to dissatisfaction, its presence may not lead to satisfaction, since students may not see it as directly related to the expected outcomes from a college experience, and usually faculty also provides similar academic/career advising. For example, fair and equable rules and polices are expected at a higher educational institution. It is only in the absence of fairness that the student experiences dissatisfaction. Attracting students, processing their applications, and guiding admitted students through the enrollment process are extremely important activities. However, treating students as partners is crucial to optimize students experience from enrollment to graduation (Kotler and Fox, 1995). In this process, a person-to-person relationship between students and universities/colleges is of extreme importance for better planning and implementation. Thus, we argue that faculty performance, advising staff performance and classes are three of the most important variables that inuence

students college experience and overall satisfaction. It is also argued that satisfaction inuences students intentions to stay at or leave the institution. It is known that satisfaction level is determined by the difference between service performance as perceived by the customer and what the customer expects (Parasuraman et al., 1986). Although there are a signicant number of variables that could inuence students perceived performance and hence satisfaction/dissatisfaction (e.g. student services and activities, etc.), the core services provided by the institution are typically instruction, advisement and student advisement. Thus, faculty performance, classes, and advising staff performance are the major factors that this study focuses on to inuence students satisfaction/dissatisfaction with higher education. It is argued that the students who have positive college experiences will be more satised than those students who do not have a positive college experience. Thus, satisfaction will inuence the students intentions to stay at or leave the institution. Methodology Data collection A modied version of the questionnaire developed by Keaveney and Young (1997) was administered to approximately 160 undergraduate business students at a state university in South Central Pennsylvania. Questionnaires were distributed in classes and students were encouraged to participate by rewarding them with extra credit points for participation. In the US environment, it is perfectly acceptable to award extra credit for partaking in in-class surveys and exercises, as it also creates desirable type of interaction between a professor and his/her students. A total of 143 useable questionnaires was obtained. The sample consisted of 95 males and 48 females. Seventy percent of the students were less than 25 years old, 6 percent were between the ages of 25 and 30, and 24 percent of the students were more than 30 years old. Measures The dimensions of the student satisfaction and retention model were measured with assessments using a ve-point Likert scale. For example, statements that focused on faculty understanding included: . faculty rarely respond promptly to students needs; . faculty seldom understand what student needs are; . the behavior of faculty usually instills condence in me; and . faculty seldom act as though they understand my specic needs. Similar to the Keaveney and Young (1997) study, the following constructs were used to measure the hypothesized effects in the study. Dependent variables Satisfaction. Overall satisfaction and intentions to stay variables were obtained from the satisfaction literature (Oliver, 1997). Student partial college experience. Three constructs were adopted from the education literature on student retention. Cognitive development is a measure of students personal learning such as improved problem solving ability. Career progress measures the degree to which students believe that programs help them to get ahead in their life

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career plans. Business skills development measures the degree to which students believe they are learning the skills they need to succeed in business. Independent variables The student satisfaction and intentions model incorporates the 18 independent variables, which were derived from the education, service quality and satisfaction literature. These variables represent six higher-order dimensions (faculty, staff advising, classes, student partial college experience, satisfaction and intentions). Table I provides the correlation matrix and mean scores. Analysis and results Although not as strong as one might hope, the Cronbachs a reliabilities for the ve student satisfaction model scales were adequate for this sample: faculty scale (understanding, a 0:70; access, a 0:79; professional, a 0:81; reliability, a 0:76; feedback, a 0:71); advising staff scale (accessible, a 0:83; reliable, a 0:88; willing to help, a 0:83; responsive, a 0:68; understanding, a 0:77); classes scale (real-world relevance, a 0:86; course scheduling, a 0:84; project/cases, a 0:75); student partial college experience (SPCE) scale (cognitive development, a 0:86; career progress, a 0:83; business skills, a 0:83); and satisfaction scale (a 0:83). Due to the size of the sample and number of variables in the model, a path diagram based on observable factor scores was used to conduct the analysis for the study. Factor scores were created for each of the six dimensions and used as input for the path diagram. That is, a factor score was created for faculty by developing a factor score for each of the factor components of the Faculty construct (i.e. understanding, accessible, professional, reliability, and providing feedback). These factor scores were then used to create one factor for Faculty. Similarly, one factor score was created for advising staff by developing a factor score for each of the factor components of the Advising Staff construct (i.e. accessible, reliable, willing to help, responsive, and understanding). These factor scores were then used to create one factor for advising staff. Also, one factor score was created for classes by developing a factor score for each of the factor components of the Classes construct (i.e. real-world relevance, course scheduling, and project/cases). These factor scores were then used to create one factor for classes. In addition, one factor score was created for Student Partial College Experience by developing a factor scores for each of the factor components of Student Experience Construct (i.e. cognitive development, career program, and business skills). These factor scores were then used to create one factor for student partial college experience. Also, one factor score was created for satisfaction by developing a factor score for each of the components of the Satisfaction construct. Table II reports the univariate statistics and correlations for the items included in the analyses. Before analyzing the hypothesized relationships among the constructs, a second-order conrmatory factor analysis was made of the multi-indicator model used in the investigation. In order to reduce the number of items and factors to six observable variables to conduct the analysis with the sample size of 143 observations, factor scores were developed to measure the Faculty, Advising Staff, Classes, Student Partial College Experience, Satisfaction, and Intention constructs. Also, invariant conrmatory factor analysis was conducted for the model for high and low student

134

Mean

SD

10

11

12

13

14

15

16

17

18

19

20

1 0.023 1.000 2 0.030 1.004 0.276 3 0.050 0.999 0.209 4 0.030 0.990 0.305 5 0.028 1.005 0.268 6 0.017 1.007 0.281 7 0.006 0.999 2 0.128 8 2 0.005 1.002 0.260 9 0.012 1.005 2 0.068 10 0.000 1.000 0.058 11 0.004 1.005 0.317 12 2 0.012 0.999 2 0.073 13 0.008 1.009 2 0.043 14 2 0.006 1.001 2 0.016 15 0.007 0.988 0.078 16 0.004 1.006 2 0.039 17 0.037 0.981 0.331 18 0.012 0.998 0.035 19 0.017 0.989 0.102 20 0.022 0.982 0.229 21 0.025 0.990 0.156 0.400 0.374 0.406 0.971 0.384 0.372 0.993 0.403 0.390 0.101 2 0.030 0.055 0.692 0.291 0.369 0.063 0.062 0.027 0.131 0.100 0.147 0.075 0.228 0.167 0.057 0.026 0.056 0.042 0.123 2 0.088 0.106 0.022 2 0.117 0.211 2 0.014 2 0.064 0.051 0.111 2 0.082 0.215 0.190 0.179 0.135 0.025 0.126 0.149 0.138 0.134 0.255 0.193 0.196 0.185 0.041 0.140 0.985 0.093 0.744 0.051 0.117 0.054 0.052 0.074 0.137 0.190 0.085 0.222 0.158 0.164 0.266 0.197 0.098 0.718 0.055 0.059 0.720 0.128 0.019 0.071 2 0.043 0.056 0.706 0.054 0.372 0.117 0.235 0.203 0.241 0.064 0.376 0.221 0.072 0.144 0.181 0.156 0.151 0.262 0.188 0.191 0.229 0.068 0.145 0.169 0.014 2 0.049 0.139 0.078 0.972 0.169 2 0.050 0.132 0.377 2 0.007 2 0.161 0.083 0.199 0.059 0.039 0.189 0.136 0.137 2 0.036 0.143 0.375 0.000 2 0.158 0.279 0.052 0.000 0.116 0.140 0.087 0.027 2 0.016 0.123 0.147 0.094 0.086 0.269 0.154 0.066 0.103 0.148 0.129 0.061 0.044 0.360 0.200 0.094 0.377 0.055 0.086 0.138 0.119 0.120 0.235 0.333 0.999 0.224 0.193 0.154 0.280 0.165 0.084 0.258 0.118 0.252 0.151 0.238 0.143 0.358 0.095 0.142 0.350 0.323 0.271 0.227 0.202 0.164 0.282 0.174 0.164 0.264 0.691 0.115 0.178 0.543 0.189

0.772 0.448

0.368

Notes: Correlations greater than j0.281j signicant at p , 0:000; correlations greater than j0.260j signicant at p , 0:001; correlations greater than j0.211j signicant at p , 0:01; and correlations greater than j0.164j were signicant at p , 0:05; 1, Faculty understanding; 2, Faculty accessibility; 3, Faculty professionalism; 4, Faculty reliability; 5, Faculty feedback; 6, Faculty; 7, Advising staff accessibility; 8, Advising staff reliability; 9, Advising staff help; 10, Advising staff responsiveness; 11, Advising staff understanding; 12, Advising staff; 13, Real world relevance; 14, Course scheduling; 15, Class projects; 16, Classes; 17, Cognitive development; 18, Career development; 19, Business skills; 20, Student partial college experience; 21, Satisfaction

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Table I. Correlation matrix

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High satisfaction group Faculty Advising staff Classes SPCE Satisfaction Low satisfaction group Faculty Advising staff Classes SPCE Satisfaction

Faculty 1.000 20.031 0.022 0.260 0.86 1.000 0.144 0.058 0.148 20.044

Advising staff

Classes

SPCE

Satisfaction

Mean 0.253 0.064 0.138 0.320 0.904 2 0.196 2 0.074 2 0.115 2 0.246 0.711

SD 1.107 1.127 1.141 1.063 0.582 0.865 0.870 0.856 0.858 0.578

136

1.000 0.469 0.122 0.121

1.000 0.260 0.200

1.000 0.187

1.000

Table II. Pearson correlation matrix and means for high/low satisfaction groups

1.000 0.234 0.088 0.131

1.000 0.257 0.040

1.000 0.288

1.000

Notes: Correlations greater than j0.362j signicant at p , 0:001; and correlations greater than j0.191j were signicant at p , 0:05

Satisfaction individual grouping. Invariant conrmatory factor analysis was necessary to ensure that when individuals are assigned to the two group conditions, the measurement of the construct was invariant between groups. The individuals were placed into one of the two group conditions, i.e. high Satisfaction group and low Satisfaction group, on the basis of a mean split of the Satisfaction-to-group scores. The results of the path analysis indicate that the model had a good t with the data ( x 2 7:00, df 7:0; p . 0:43, RMSEA 0:001). Invariant path analysis was conducted for the two groups to test whether the model was viewed in the same way (i.e. statistically insignicant) across the two groups high and low satisfaction. Statistical insignicance would indicate that each group of respondents was viewing the constructs identically. The results of the path analysis indicated that the model was strongly invariant across the two groups ( x 2 34:19, df 28:0; p . 0:19; GFI 0:92; CFI 0:88; RMSEA 0:067). Strongly invariant means that the b, G, f, and c matrices are invariant across groups. Figure 2 illustrates one of the most signicant reasons why higher educational institutions exist in developed Western economies. To this end, the gamma coefcient for the relationship between Faculty and Student Experience is positive and signicant (g 11 0:24, t 3:10, p , 0:01). The gamma coefcient for the relationship between Advising Staff and College Experience is positive but not signicant, which may be interpreted as no dissatisfaction with the advising staffs performance. Also, the gamma coefcient for the relationship between Classes and college experience is positive and signicant (g 13 0:26, t 3:05, p , 0:01). The beta coefcient for the relationship between Student College Experience and Satisfaction is positive and signicant (b 21 0:37, t 4:75, p , 0:001). The direction of this relationship is consistent with the Ajzen and Fishbein (1980) theory of reasoned actions. Finally, analysis of the means indicated that a positive Student Partial College Experience resulted in higher satisfaction (means 0.33 positive college experience versus 2 0.68 negative college experience, p , 0:001).

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Figure 2. Results of LISREL: path estimates and t-values (the t-values are in brackets)

Discussion and conclusions This study provided empirical ndings to understand student satisfaction with higher educational institutions. Also, using a literature review from education and marketing, this study emphasized the role of satisfaction and customer orientation as envisioned in these institutions. It is recommended in this study that the changing nature of the higher education marketplace encourages college administrators to apply the customer-oriented principles that are used by prot-making institutions. Philosophically, the student satisfaction concept should not be misinterpreted. Similar to the suggestions made for the non-prot theater industry (Voss and Voss, 2000), given the distinguishing features of the higher education institutions, the value should be based on the long-term interests of students and society and institutional goals and commitments. It is the quality of the experience and relationship that benets both a higher education institution and its society. Thus, there is a symbiotic relation between the student, college or university, and society as a whole. The society benets from a strong educational system. We also hope that we have raised enough attention to increase the research efforts in this area. Our overall hypothesis is that satised students are necessary to accomplish the goals of higher educational institutions. The study results indicate that the path coefcients from faculty and classes to students partial college experience are consistent with the assumption that these are key factors that inuence student partial college experience. Also, the path coefcient from student partial college experience to satisfaction was consistent with Herzbergs two-factor theory. In addition, students who have a positive college experience are more likely to be satised with the college or university than students who do not have a positive college experience. This theory is consistent with an organization taking the steps to become market-oriented to satisfy the wants and needs of its customers. This approach appears to be an appropriate strategy for colleges and universities to implement to address the perennial problems in the higher education marketplace. By focusing on antecedents to student satisfaction, colleges and universities can align their organizational structure, processes and procedures to become more customer orientated (Lovelock and Wirtz, 2004).

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Advising staff as an integral part of the US higher education system have been highly promoted as an essential service to provide information and counseling for students, enabling them to proceed through college or university in an efcient manner. As Herzbergs two-factor theory suggests, a non-signicant path coefcient from the advising staff performance to student partial college experience is consistent with the role of a hygiene factor (Herzberg et al., 1967). So while the absence of good advising staff performance may lead to dissatisfaction, their presence does not lead to satisfaction, since students may not see advising staff as being directly related to the expected outcomes from a college experience. Consequently, an insignicant path coefcient from advising staff performance to college experience may be interpreted as meaning that students are not dissatised with the advising staffs performance. However, the problems in these external satisfaction factors can serve as barriers to motivation, even if the motivating factors themselves are addressed satisfactorily. More studies are needed to examine this issue in greater detail. This study is only part of an ongoing effort to model student satisfaction and retention in a higher education context. The initial results are encouraging as they lay the groundwork for future studies. Future studies would mostly focus on the retention part of the model. The retention component could take the longest time, since it will require tracking students progress through higher education intentions to graduation. Thus, it is anticipated that periodic reporting of the ndings over a ve- to six-year period is warranted.
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