Importance of Employee Engagement - Coursework Example

?Employee Engagement Introduction Employee engagement may be defined in several ways. One of the earliest definitions was formulated in 1990 by William Kahn, professor and researcher in the Boston University School of Management. At that time, what he referred to as work engagement was described as “the harnessing of organizational members’ selves to their work roles.” Subsequent development expanded the concept to include how the employees feel towards their work, the degree to which they find their workload manageable and the job itself personally meaningful, and the hopes they nurture about the future of their work (APA, 2009). Today, employee engagement is “an individual’s sense of purpose and focused energy, evident to others in the display of personal initiative, adaptability, effort, and persistence directed towards organizational goals” (Macey & Schneider, 2008). It is “an employee’s drive to use all their ingenuity and resources for the benefit of the company” (Elsworth, 2011, p. 6). It refers to the amount of “discretionary effort” exhibited by the employees at work, in the form of extra time, brainpower or energy (Towers-Perrin, 2003 as cited in Carter, 2010). What it is not employee engagement is “staff satisfaction surveys” published by staff survey companies, because employees can give a high rating to surveys but do no meaningful work at al (Gable, et al., 2010). It is more about productivity and performance by a staff inspired to go the extra mile, willingly (Elsworth, 2011, p. 6). The T&D editorial staff concurs in their article “Employee Engagement Correlates to Career Advancement and Training” (T&D, 2011), where it affirms that “employee engagement needs to be part of the everyday culture of an organization, not addressed only through annual surveys” (p. 21). The article cites that in a survey of 11,000 employees by BlessingWhite, only 31 per cent of employees worldwide are engaged, 17 per cent are disengaged, and that more employees are now searching for greener pastures outside their organizations than there were in 2008. The same research showed that the fault may lie with the executives and managers in the organization, who have trouble adopting leadership behaviours that are needed to fuel employee engagement. On the other hand, the Partnership for Workplace Mental Health, a project of the American Psychiatric Association (APA), reported in 2009 that only one in every five workers is engaged in their work. Viewed in tandem with the T&D article, then, it appears there has been an improvement in the number of engaged workers, from 20 per cent to 30 per cent of the work force, indicating the effectiveness of government and private sector efforts to encourage employee engagement. On the other hand, the Partnership for Workplace Mental Health, a project of the American Psychiatric Association (APA), reported in 2009 that only one in every five workers is engaged in their work. Certain organization responses were undertaken with the corresponding engagement ratios: Engagement Levels by Organization Responses Action Taken % Engaged Layoffs/downsizing 25% Salary reductions 26% Hiring freeze 27% Salary freeze 28% Reorganization/ restructure 28% Postponement of projects 30% New business venture 37% “Employee Engagement Report, 2011” by BlessingWhite, cited in T&D, 2011 From the foregoing table, it is apparent that the most radical and severe actions were taken in those companies for which the ration of engaged personnel were lowest; as the ratio increased, the action taken was seen to be more tempered and less drastic, creating less displacement for the business. 2. Terms of reference This body seeks to address the following course requirement: “Employee Engagement was described by one presenter as having a positive impact on their own Company performance. Your Chief Executive is keen for you to critically review the concept and to find evidence as to whether and how such an impact could be achieved.” (1st question). From the statement, it is understood that the following explanations are to delve into the different positive impacts of employee engagement as they manifest in company performance. It will necessarily touch upon the issues that pertain to the application of employee engagement in the practice of business. Finally, two organizations that have employed employee engagement shall be examined and compared to draw insights into the practices associated with it. 3. Impacts of employee engagement There are various ways that employee engagement could and had actually created a positive impact on company performance. (1) Increased employee engagement in the workplace results in better employee productivity and loyalty (APA, 2009; Markos & Sridevi, 2010). (2) Companies with high employee engagement tend to outperform low engagement companies in the profitability of their business, by realizing a 19.2 per cent higher operating profit, 13.7 per cent higher net income, and 27.8 incrase in earnings per share (Kelleher, 2009, p.7). Each disengaged employee that is converted into an engaged employee can add about US$3,000 to the firm’s profits on a yearly basis (Elsworth, 2011). (3) A high level of employee engagement is correlated with cost savings in the business (e.g. Best Buy) (APA, 2009) (4) Increasing employee engagement, even if gradually realized from year to year, is also positively related to higher sales revenues by as much as 10 per cent (e.g. JC Penny). As much as 43 per cent more revenues are generated by engaged employees (Elsworth, 2011). (5) Improved employee engagement relates to lower employee turnover, according to linkage studies conducted by research firms Gallup and Towers Perrin. How an employee perceives himself in relation to the organization is an integral part of employee engagement. (1) As to Quality: 84 per cent of highly engaged employees are convinced that they can improve the quality of their firm’s products; among the disengaged, only 31 per cent feel they can create a positive impact on product quality. (2) As to Customer Service: Among highly engaged employees, 72 per cent believe they can positively influence customer service; only 27 per cent of the disengaged believe they can do so. (3) As to Cost Control: Of the highly engaged employees, 68 per cent are convinced that they can lower the costs incurred in their job or unit, compared to only 19 per cent of the disengaged concerning this issue. (4) As to Loyalty: Out of those highly engaged, 59 per cent expressed their desire to stay with the current employer; among the disengaged, only 24 per cent indicated that they plan to remain. 4. Challenges in implementing employee engagement There are also challenges posed to the company in its implementing employee engagement. (1) Communication is a leading indicator of the organization’s financial performance; not coincidentally, communication between superiors and subordinates are likely to have four times higher levels of employee engagement. For organizations with healthy corporate communication practices, not only are fewer employees dissatisfied with the organization, but also fewer indicate that they do not feel strongly committed to their organization (APA, 2009). This has implications on corporate communication practices as a matter of policy or SOP. Unfortunately, too many firms still foster a gap between management and employees that impedes communications. (2) Most companies are impeded by inconsistent management styles strongly influenced by the individual attitudes of managers, thereby leading to perceptions of unfairness among the employees. Trust, which is the basis of employee engagement, cannot be developed among employees if there is perception of favouritism and partiality (Gatenby, et al., 2008). (3) In relation to the first two challenges, most management systems intentionally withhold information and knowledge with the rest of the communication due to rigidity in the channels of communication, or the observance of long-standing norms of corporate culture. Traditionalist organizations typically enforce information confidentiality between management and employees (Gatenby, et al., 2008). (4) A reactive manner of decision-making also tends to diminish the trust of employees, this time on the skill and competence of the person of the manager. Again, most managers are moved to act only when the problem has escalated. A proactive decision-making tradition impresses employees with the rightness of the decision made; it also tends to address workplace problems before such are allowed to escalate. Therefore, employee identification with and commitment to the organization is sooner accomplished if the employees repose their confidence in managements’ decisions (Gatenby, et al., 2008). (5) Majority of business organizations have not designed work-life balance into their work programs and schedules (Shankar & Bhatnagar, 2010). Too often, the company encourages staff to work too many hours, and company culture more frequently favours and even requires overwork schedules (Gatenby, et al., 2008). (6) Largely because of challenges 3 (restricted information) and 4 (reactive decision-making), the staff of many organizations tend to develop a low perception of their senior management; these misperceptions are generally based on lack of visibility and lack of interaction between higher management and the employees (Gatenby, et al., 2008). 5. Employee Engagement as source of competitive advantage According to the BlessingWhite study (T&D, 2011), employees indicated that the key drivers that would improve their job satisfaction are opportunities to apply their talents, career development opportunities, and training. Other motivating factors cited by employees include celebration of success, praise and recognition from the immediate supervisors or managers as well as the organization itself. These intrinsic motivators are more significant drivers of employee engagement than financial rewards (Dent & Holton, 2009). A motivated and engaged work force can be a source of competitive advantage because of the potential for greater productivity. But more than this, however, employee engagement may also create direct competitive advantages such as developing brand identity and ensuring service superiority, two aspects which shall be discussed here. Brand identity and engagement through employee engagement One instance that presents special considerations is that of QinetiQ, in Farnborough, UK. The case of QinetiQ is that of a public sector organization converting into a privately-owned company (Hardaker & Fill, 2005). A new corporation is created, and which presents new opportunities for the intellectual and emotional engagement of employees. In particular, an employee-targeted communication strategy is employed that maximizes the effectiveness of the total employee engagement effort. What takes this particular case to a higher level, however, is the inclusion of brand development as an integral component of employee engagement. In this application, the satisfaction, commitment, and loyalty developed among employees reflects upon the corporate brand’s identity and projection on its stakeholder audiences, both internal and external. Service superiority rendered by engaged employees In the service industry, employee engagement has a more direct impact upon corporate performance. This is especially true of the health care industry. The provision of health care is necessarily carried out through direct and intimate personal contact between the health care professional and the client-patient, in a manner that impacts profoundly on the customer. The paramount metric, patient satisfaction, is therefore strongly connected with employee performance; employee performance, on the other hand, is highly enhanced when the employee is imbued with a sense of collaboration and partnership with the organization. According to surveys, there is an imperative for health provider organizations to cultivate a partnership with engaged employees because it redounds to the patients’ best care (Health Care Registration, 2011, p. 3). 6. Employee engagement at ENSR and Siemens In this portion of the discussion, two organizations – ENSR and Siemens – and their respective application of employee engagement are examined. The cases were intentionally chosen because the employee engagement program in each case targeted specific problems and employed particular practices. This was deemed to be more informative than if the firms were chosen for their general approaches to employee engagement, which tended to mirror each other from a strategic viewpoint. The first company, ENSR, located in Westford, Massachusetts, began in 1968 as a high-end boutique environmental research firm. Thirty years thereafter, it had progressed into a full-service environmental firm. Its business model goes beyond air quality, into a broad range of consulting, engineering, remediation, and other related services. The company has a reputation for specialized and industry-leading technical expertise. However, in 1998, client feedback asserted that ENSR was suffering from a high employee turnover rate that affected them by creating discontinuities and subsequent inefficiencies, particularly because of the loss of project and institutional knowledge (Kelleher, 2009) – in short, a corporate brain drain. Because of the erosion of institutional knowledge in the gradual exodus of skilled and knowledgeable staff, the firm’s services and deliverables had begun to suffer. Clients thus expressed a growing impediment in their continued long-term stay with the business (Kelleher, 2009). The following table summarizes the salient practices employed by ENSR in engaging its employees, towards the principal purpose of arresting the exodus of the skilled and knowledgeable workers (summarized from Kelleher, 2009): Strategic aspect Practice implemented at ENSR Executive support Strong commitment, and monthly report by CEO to the organization on the firm’s overall performance Hiring Search for talent and dedication Training Direct access to online courses, links to external sources such as professional seminars and conferences, and ENSR’s tuition reimbursement benefit; annual training of 4 to 5% of payroll Communication Constant and through all levels Greater recognition for high performance Spot bonuses for the deserving employee, allocation of recognition budgets at corporate level; Corporate culture Promotion of a learning culture and a safe, positive work environment Investments In sustainable growth, employee health and safety Author-created table, from information provided by Kelleher (2009) The second company upon which attention shall be focused is Siemens USA, and independent subsidiary of its 160-year-old German holding company, Siemens AG. The company operates under a tradition of business autonomy which has created individual and disparate reward systems for the different business units. This tended to create disengagement among employees organization-wide because of perceived inconsistencies in standards of performance. Siemens USA realized that the long-observed autonomy must be tempered by present-day requirements for corporate-level visibility, oversight and control (Martin, 2011). The specific aim of the engagement effort at Siemens is therefore to create an effective set of guidelines to create a company-wide reward and recognition program. The best practices associated with this initiative are specified in the table below (summarized from Martin, 2011): Best Practice Implementation in Siemens Cultivation of stakeholder buy-in Consensus was built among counterparts in Compensation and HR, and across the business units, which all shared their common processes, current practices, themes and approval structures. The results were then “sold” to the top executives, then coordinated with Finance. Choice of technology that works best for the rewards program Both off-the-shelf packages and customized solutions were considered, based on ability to meet the company’s needs, implementation time and effort, cost and reliability. The platform chosen must meet internal company standards for compliance, control, consistency and convenience. Connection of employees with the brand (i.e., “Live the Brand”) An internal branding program, “You Answered,” was devised to complement Siemens AG’s external advertising campaign “Answers”. The program recognized the fact that it was the employees who provided the “Answers” for the external campaign. This dovetailed the internal program (for the employees) with the external program to create an seamless whole. Development of momentum over time Effort was made to avoid “starting with a bang and ending with a whimper.” Siemens took a bottom up approach which built the program organically from the grass roots (business unit) level, instead of issuing directives from above. Partnership with the right provider Siemens USA chose Madison as solution provider because they exhibited a strong understanding of the effective drivers of employee recognition programs. In this case, Madison was able to understand the peculiarities of the multiple business units and autonomous organizational structure of Siemens that made common reporting and pull-throughs difficult. The unique organizational and technological structures of Siemens were reflected in the solution provided by Madison. Author-created table, from information provided by Martin (2011) Evaluative discussion From the two programs presented pertaining to ENSR and Siemens, respectively, it is first of all apparent that they seek to provide solutions to two different problems – ENSR wishes to reduce its employee turnover and retain its skilled personnel who possess expert knowledge, while Siemens seeks to create a company-wide reward and recognition program to supersede the several different rewards programs created per business unit. Fundamental differences exist between the two; ENSR assumes a top-down approach initiative from the policy-making top management and implemented downwards, while Siemens begins from the grassroots and moves upward to the executive level. ENSR’s program involves the entire range of HR activities from the selection and hiring stage through training to the regular discharge of one’s functions. Siemens’ program is entirely concerned with rewards and recognition. ENSR, because it pertains to nearly every aspect of the HR function, specifies directions more than particular procedures; for Siemens, the practices refer to specific procedures that are followed according to a strategic flow or sequence. Also, ENSR’s is a long-term plan that includes development of a corporate culture, while Siemens is essentially a project meant to create a finite output – the plan for rewards and recognition (the implementation of which is another concern). Finally, Siemen’s plan requires a greater degree of collaboration and planning among units at the operational management level, while that of ENSR is conceptualized by the HR unit with the mandate of the top management. Despite the differences, the ultimate goal of both programs is the engagement of employees in a manner that aligns their personal goals, talents, and aspirations along the strategic goals of the company. The end result should be the same – the creation of motivated and satisfied personnel who had developed a sense of loyalty and trust in the company for the long term. 7. Evaluative Conclusions This discussion set out to critique the concept of employee engagement and to explore its implications upon the organization. In the course of the discussion, it became apparent that employee engagement is a form of intrinsic self-motivation that enables a person to make use of his talents and abilities, be inspired by the challenges posed by his job to aspects of his own self-development, and to eventually pursue his own goals in line with those of the company. Even as the person experiences a level of self-fulfilment and satisfaction, the company benefits through improved productivity, higher revenues, stronger profitability, reduction in costs, lower turnover and increased work force loyalty. Despite the mutually advantageous impacts of employee engagement, implementation still poses challenges for the traditional firm that resist transparency and open communication, that espouse a more autocratic, inefficient, or reactive (rather than pro-active) management style, or that fail to create a work-life balance. Unless these firms overhaul their traditionalist corporate culture, then employee engagement may prove highly unlikely. Finally, employee engagement taken one step further is a source of competitive advantage. Aside from the advantages already mentioned, the employment of brand identity and service superiority at a level that can only truly be attained by the engaged employee is an aspect of employee engagement not yet explored by many. Overall, there are still many things unknown about the effective use of employee engagement that may be the subject of further empirical investigation. Reflective Account During my younger years, I had often been asked what I would want to do when I had grown into adulthood. Like many youngsters, I had not given those things much serious thought, but when I did envision myself grown up, it was usually in some glamorous job such as the lead guitar in a rock band, or the top detective in the police force, or the chief firefighter. The nature of the job actually did not matter to my young mind, but I always saw myself as being in the forefront of something. When it came time to enter an institution of higher learning, I knew I still wanted to occupy a position of leadership, but me expectations had become more down to earth; I realized that what I wanted was to join a business organization and occupy a high position, not so much for the power or honor it conveys, but because it allowed its occupant the opportunity and discretion to make a change in people’s lives. I am more of a people person, you see. While I performed adequately in such subjects as mathematics or or science, I felt that they were never my strongest suits. But when I worked and interacted with people, then I felt that not only did I perform at my best, but I was happy and fulfilled in doing it. The course I had chosen to pursue is HRM, or human resources management, and employee relations. This is not a surprise, because it is in HRM that one is able to create the greatest value not only for the company, but moreso for the people in the company. I find it quite challenging, because it combines a knowledge of business, law, and the social sciences such as principles of psychology and sociology. There is a fundamental difference in how these fields view people. For the fields of business and economics, people are seen as a productive resource which must be maximized by the production process in order for vital goods and services to be created at the lowest cost; that is why we speak of people as “human resources.” In the case of labor law and politics, workers in the organization are thought of as counterparties to shareholders of the business, and possessing rights and interests which are often contrary to theirs; workers are therefore referred to as “labor” or the working class versus “capitalists”. Employee relations are therefore concerned with balancing employees’ compensation, benefits, and working conditions on the one hand, and shareholders’ profits on the other hand, as an increase in one is often associated with a decrease in the other. While these are real-world situations, they are combined in HRM with psychology and the social sciences. It is in this area that people are perceived as the end in themselves, not a resource and not a necessary adversary. This is the study of people in all their complexity as the principal subject of interest. It is where the diligent scholar seeks to understand why people behave the way they are, to what extent culture and society influence such behaviour, and to what extent also do personalities and aspirations. Not too long ago, during the time of Taylorism and Fordism, people were seen as responding only to the monetary reward in order to get people to perform as the organization expected them to. Today, people are understood to be motivated by such intangibles as recognition, esteem, challenge, engagement, and a sense of self-fulfilment. All these insights I have gathered from my studies so far in this field. There are many things that I have already come to understand, but I feel that there is much room for improvement that I can still cover before I consider myself ready to embark on the full-time application of what I have learned. After all, it is one thing to know the theories of the noted authors who, brilliant as they are, have given ideas that tend to conflict with one another. This is not a surprise, of course, because understanding the complexities of people and how they respond to their environment reveals itself in small steps to many people. What I find myself wanting to achieve is to reconcile these different theories and principles and to be able to reasonably apply them to actual work situations. I am well aware that practitioners often find theories either impractical, simplistic, or irrelevant. There are those, however who, like me, find that theory can be very relevant in equipping managers and decision-makers with the skills and knowledge that could help them better address real life situations. This is where I wish to develop further. Someday I wish to be the HRD manager in a large business organization that has a large work force and a complex structure. It is in such a setting that I feel I could fully apply what I have learned in my HRM and human relations course. I would like to develop a deeper understanding of human behaviour and employee relations in a multinational company, even as the implications of multinationalism are slowly evolving. Aside from gaining more theoretical understanding, I feel I could improve further in my people skills and communication skills. If there is anything that I had garnered from my studies, it is the sense that nothing is simple, and that mastering the subtle techniques and methods that an effective human resources manager will take a long time and much practice in actual real-word business (or even non-profit or government) organizations. In this aspect the case studies we took in class help a lot in envisioning how theories are actualized, but again I am aware that case studies are still the simplified versions of real, complex situations. I still have much to learn in this course and even after it. However, it remains my sincere hope that when I am confronted with the situations that will require action, I will be able to rise to the challenge. References Carter, R 2010 “Increasing employee engagement and performance: Drama-based interventions.” Training and Development in Australia. Feb. 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