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92 THE RESEARCH PROCESS

As in the above case, whenever the relationship between the independent
variable and the dependent variable becomes contingent or dependent on
another variable, we say that the third variable has a moderating effect on the
independent variable–dependent variable relationship. The variable that moder-
ates the relationship is known as the moderating variable.

Example 5.10 Let us take another example of a moderating variable. A prevalent theory is that
the diversity of the workforce (comprising people of different ethnic origins,
races, and nationalities) contributes more to organizational effectiveness because
each group brings its own special expertise and skills to the workplace. This syn-
ergy can be exploited, however, only if managers know how to harness the spe-
cial talents of the diverse work group; otherwise they will remain untapped.
In the above scenario, organizational effectiveness is the dependent variable,
which is positively influenced by workforce diversity—the independent vari-
able. However, to harness the potential, managers must know how to encourage
and coordinate the talents of the various groups to make things work. If not, the
synergy will not be tapped. In other words, the effective utilization of different
talents, perspectives, and eclectic problem-solving capabilities for enhanced orga-
nizational effectiveness is contingent on the skill of the managers in acting as cat-
alysts. This managerial expertise then becomes the moderating variable. These
relationships can be depicted as in Figure 5.4.

The Distinction between an Independent Variable
and a Moderating Variable
At times, confusion is likely to arise as to when a variable is to be treated as an
independent variable and when it would become a moderating variable. For
instance, there may be two situations as follows:

Situation 1
A research study indicates that the better the quality of the training programs in
an organization and the greater the growth needs of the employees (i.e., where

Figure 5.4
Diagram of the relationship among the three variables: workforce diversity, organiza-
tional effectiveness, and managerial expertise.

Organizational
Workforce diversity
effectiveness
Independent variable Dependent variable

Managerial
expertise

Moderating variable