Employee Engagement and Organizational Performance - Research Paper Example

?The Relationship between Employee Engagement and Organizational Performance By [Presented to] of EXECUTIVE SUMMARY The paper provides a review of current academic and practitioners’ literature in the context of the relationship between employee engagement and organizational performance. For this purpose, a number of literature has been assessed and analyzed and critically. As per the survey conducted by Gallop Organization (2009) on more than 600000 workforce, more than 500 organizations in more than 130 countries’ it was found that employee engagement is based on the fulfillment of basic needs, management support, teamwork and growth. Moreover, the survey also stated that 28% of the global workforce is engaged, 54% is not engaged and 17% is actively disengaged. It was also found that with high level of employees’ engagement organizations tens to do well in the competitive business environment. The discussion aims to investigate the complex issues in contemporary HRM by focusing more on socio-economic issues offering challenges to HR practioners. The discussion underpins relevant literature to seek answer for the key issue revolving around socio-economic issues posing as a great challenge for contemporary HRM that is yet to be defined and understood fully in the current business environment. Majority of the literature stated that high level of employee engagement leads to better organizational performance but organizations need to be transparent and honest in their approach while making their employees fully engaged to accomplish stated goals and objectives. Based on the analysis of the literature in the context of employees’ engagement and organizations performance, it was concluded that strengthening the relationship between employees and organizations matters the most in order to enhance the overall organizational performance. However, it is important to introduce employees to the organizational culture in a clear manner along with fulfilling their basic needs. Definition of Employee Engagement Dernovsek (2008) defined employee engagement as initiatives being taken by employees to help organizations to succeed in the competitive business environment through dedicated approach and efforts. Robinson, et al (2004) stated that employee engagement is the involvement of employees with enthusiasm for work that often results in better organizational performance. Furthermore, Fernandez (2007) stated that employee engagement is the positive attitude held by employees for their organization’s values and objectives that is created by effective relationship between employers and employees. Coffman (2000) stated that there is a positive relationship between employee engagement and organizational performance as engaged employees are more likely to help organizations through their dedicated approach and efforts. Meere (2005) conducted a survey on 360000 employees from 41 companies of 10 different countries and found that operating and net profit drastically reduced with low engagement of employees. Clifton (2008) stated that employee engagement is closely linked to the organizational performance but also requires organizations to form sustainable relationship with employees. On the other hand, Vance (2006) believed that every organization has different ways of engaging their employees to enhance organizational performance. However, motivation and compassionate behaviour always help organizations to engage their employees to perform well along with putting their best foot forward in achieving the proposed goals and objectives in a systematic and enthusiastic manner. On the basis of the above discussion, it can be said that employee engagement leads to better organizational performance but organizations need to maintain good relationship with employees in order to win their confidence and loyalty resulting in better engagement and better creation of value and thus enhancing the overall organizational performance. Employee Engagement and Organizational Performance Hunter & Schmidt, (2004) sated that the quality of human resources in an organization often illustrates and indicates its growth and sustainability. Harter and Schmidt (2009) in their study conducted on employee engagement and organizational performance stated that there are a number of factors deciding the overall engagement of employees in the success and development of organizations. On the basis of accumulated 199 research studies across 150 organizations in more than 26 countries, it was found that nine outcomes play an important role in defining the relationship between employee engagement and organizational performance. These outcomes are customer engagement, profitability, accountability, productivity, turnover, safety measures, safety incidents and quality of work. The research also showed that employees are highly engaged when all the mentioned elements are accepted well by employees and organizations. The relationship between employee engagement and organizational performance is highly generalized across organizations which mean that employees’ engagement can be similar in a number of organizations based on different elements that often decide the level of employee engagement. Harter, et al (2005) suggested that employees’ engagement is also dependent on a number of socio-economic factors that also include demographic factors. At times, health conditions affect the involvement and engagement of employees and also social and personal conflicts. However, organizations can only try to eliminate socio-economic barriers in order to facilitate the engagement of employees to lead better organizational performance. Clifton (2008) believed that organizations should empower and treat employees equally in order to gain their engagement and enhance their satisfaction level. This also suggests that in spite of a number of studies being conducted on positive relationship between employee engagement and organizational performance; employee relationship management still need to be understood well. Source: Quintana (2011) http://www.causerelatedlearning.co.uk/barriers-to-employee-engagement/ The above chart shows that employees who are engaged are often proud to work for organizations considering their basis needs are fulfilled and often talk to friends and family members along with being loyal to organizations. Source: Ingham (2008) http://strategic-hcm.blogspot.in/2008_01_01_archive.html The above chart shows that senior leadership plays a major role in small organizations towards employee engagement while direct supervision also plays an important role in both small and large organizations. Moreover, people centric culture, formal and informal communication, training and development, compensation and benefits, formal recognition and employee empowerment also plays an important role in facilitating employee engagement leading to organizational growth and development. It can be believed that many factors play an important role in strengthening the relationship between employee engagement and organizational performance and factors may be different for each organization. It is important to identify key factors leading to high degree of employee engagement along with making sure that employees feel connected to organizations in every sense. The next part of the discussion presents an understanding over employee engagement related theories that will help in understanding how employee engagement can be nurtured well among organizations leading to organizational growth and development. Employee Engagement and Related Theories Merkle (2005) stated that there are two important theories of employee motivation developed by Mc Gregor; Theory X and Theory Y. Theory X states that employee dislike work and are inherently lazy. As a result of this management believes that employees need to be supervised and controlled in order to derive value from their skills. On the other hand, Theory Y states that employees may be self ambitious and self driven and require little motivation. They are always motivated and fulfill their roles and responsibilities in an expected manner. However, Conaty and Charan 2011) believed that employees motivation and demotivation is dependent on the management of organizations. It can be said that Mc Gregor’s ideas and assumptions on employees and their attributes are based on personal understanding that can be easily challenged considering the current business environment. Employees can be motivated when they are treated as assets and when they are treated in an equal manner (Ulrich, 1997) Lutans (2011) stated that contingency theory is a behavioral theory that states that there is no best way of managing an organization or people or to make decisions as final course of action and decision is dependent on internal and external factors. Morgan (2007) stated that organizations are dependent on many external factors like technology, society, consumers and employees. All these factors affect the operations and functions of organizations. Woodward (1995) stated that socio-economic factors play an important role in the decision making process of organizations as these are external factors and contingent in nature. Often, these factors change and thus compelling changes in the operational and functional structure of organizations. Thompson (1997) believed that contingency theory states the significance of socio-economic factors in the management of human resources with different people from different social and economic background offering social and cultural challenges to the HRM of organizations. Summary On the basis of the discussion based on analyzing key issues pertaining to contemporary human resource management; it was found that employee relationship management has emerged as one of the key issues being affected by a number of factors and socio-economic factors being one of those (Caldwell 2001). On the basis of literature underpinning, it was found that in order to strengthen employee relationship management, it is important to understand socio-economic factors along with implementing discussed theories to an extent (Storey 1992). This will help in addressing key issues pertaining to contemporary human resource management. BIBLIOGRAPHY Beardwell, J. and Claydon, T. (2007) “Human resource management: a contemporary approach”. 5th ed. Harlow: FT/Prentice Hall. Bailey, K.D. (1994). “Sociology and the New Systems Theory: Toward a Theoretical Synthesis”. New York: State of New York Press. Conaty, Bill, and Ram Charan (2011) “The Talent Masters: Why Smart Leaders Put People before Numbers”. Crown Publishing Group Caldwell, R. (2001). ‘Champions, adapters, consultants and synergists: the new change agents in HRM’. Human Resource Management Journal, Special Issue, 11, 3, 39–53. Clifton, James K. (2008) “Engaging your employees: Six keys to understanding the new workplace “2002 SHRM Foundation Thought Leaders Remarks. Society for Human Resource Management Coffman C. (2000) “Is Your Company Bleeding Talent? How to become a true “employer of choice”. The Gallup Management Journal, 2000. The Gallup Organization, Princeton, NJ Dernovsek D. (2008) “Creating highly engaged and committed employee starts at the top and ends at the bottom line Credit Union Magazine” Credit Union National Association, Inc. Fernandez. C.P. (2007) “Employee engagement. Journal of Public Health Management and Practice: [Online] Accessed on November, 06, 2012 from http://find.galegroup.com Harter, J. K., & Schmidt, F. L. (2008). “Conceptual versus empirical distinctions among constructs: Implications for discriminant validity” Industrial and Organizational Psychology, 1, 37–40. Hunter, J. E., & Schmidt, F. L. (2004) “Methods of meta-analysis: Correcting error and bias in research findings” (2nd ed.). Newbury Park, CA: Sage. Harter, J. K., Schmidt, F. L., Asplund, J. W., & Killham, E. A. (2005) “Employee engagement and performance: A meta-analytic study of causal direction”. Omaha, NE: The Gallup Organization. Ingham. J (2008) "The Truth about the HR Department". [Online] Accessed on November, 14, 2012 from http://strategic-hcm.blogspot.in/2008_01_01_archive.html Jones, Ishmael (2008) “The Human Factor: Inside the CIA's Dysfunctional Intelligence Culture”, New York: Encounter Books Lutans, F., (2011) “Organisational Behavior”, Twelfth Edition, Tata McGraw Hill Morgan, G. (2007) “Images of organization”, Thousand Oaks: Sage Merkle, J A (2005) “Management and Ideology”. University of California Press Marchington, M. and Wilkinson, A. (2008) “Human resource management at work: people management and development”. 4th ed. London: CIPD Meere M. (2005) “High cost of disengaged employees Victoria: Swinburne University of Technology” [Online] Accessed on November, 06, 2012 from: http://www.swinburne.edu.au/corporate/industrysolutions/ee/reports/Employee%20Engagement%20in dustry%20Breifing%20Paper%20Dec%202005%20.pdf (October 30, 2008) Owens, R.G. (2004) “Organizational Behavior in Education: Adaptive Leadership and School Reform”, Eighth Edition. Boston: Pearson Education, Inc. Quintana. P (2011) "Barriers to Employee Engagement". [Online] Accessed on November, 14, 2012 from http://www.causerelatedlearning.co.uk/barriers-to-employee-engagement/ Robinson D., Perryman S., and Hayday S. (2004) “The Drivers of Employee Engagement Report 408, Institute for Employment Studies”, UK Storey, J. (1992) “Developments in the Management of Human Resources”. Oxford: Blackwell Publishing. Thompson, J. D., (1967) “Organizations in Action”. New York: McGraw-Hill Thomas, J (2004) “Guide to Managerial Persuasion and Influence” Upper Saddle River, N.J.: Pearson Prentice Hall Tyson, S. (1995) “Human Resource Strategy: Towards a General Theory of HRM”. London: Pitman Publishing. Ulrich, Dave (1996) “Human Resource Champions. The next agenda for adding value and delivering results” Boston, Mass.: Harvard Business School Press Vance R. J. (2006) “Employee Engagement and Commitment SHRM Foundation”, USA Woodward, J., (1965) “Industrial organization: Theory and practice”. New York, NY: Oxford University Press Weightman, J. (2008) “The Employee Motivation Audit” , Cambridge Strategy Publications Read More