Managing Employee Engagement and Organizational Performance - Case Study Example

Executive Summary For many years now employee engagement has been a popular issue in corporate circles. Engaged employees are those who put up an extra effort in their work, which is beyond that is considered to be ‘enough’. They make sure that their effort helps in improving the working conditions of the company. They have that urge to be most productive so that they leave a benchmark in the organization and make a measureable contribution to the organizational culture. Towers Perrin, which was professional services firm specializing in human resources and financial services carried down a research and published about Managing Employee Engagement and Organizational Performance. In their research they focused on what an organization needs to improve, and they ended up with customer satisfaction, business performance and organizational culture. Towers Perrin initiated their research with organizational culture, in which they recognized the importance on ensuring that all employees were engaged. Organizational culture is an idea in the area of management which describes the attitudes, psychology, beliefs and values and experiences of an organization. In this research Towers Perrin highlighted the impact of Employee Engagement in the 12 month period. The progression in net income growth, operating incomes, financial measure and earnings per share was a lot more than those companies who did not focus on employee management. Engaged employees are aware of the various aspects of the business and they are ready to corporate with the colleagues which will help improve the performance within the organization. High organizational performance is as a result of employee engagement. One of the hallmarks of good management is to attract new talented customers and to employee the most talented. The key characteristic of a good leader is to manage his group and to develop a strong organizational culture which mainly focuses on employee engagement and commitment. Contents Contents 2 Bibliography 16 Introduction We live in the 20th century where everything is fast paced and technology is increasing rapidly, the demographics are changing, and there is a lot of competition in the global economy. Therefore all these changes have led to the all time changes and innovations within the organizations. Organizations now needs effective workforce so that they can reduce the cost of their industries and increase the productivity. There was a time when the HR practices were in use and their coverage without asking employees about their satisfaction. The management assumed that the more the policies, the better and in this way the employee will be more productive. However, this is not the case now and we have moved on. Employee opinion matters now, along with the level of engagement and the associated degree of job satisfaction. Employing an engaged worker is now the top most priority of an organization both in the public and the private sector (Purcell). The relationship at work is also one of the key factors which help the employer to have a strong mutual understanding with the employee. However it is not surprising that so many organizations are interested in raising the engagement level of their workforce (Gatenby). The whole objective behind this report is to critically examine the role of employee engagement in the delivery of enhanced organizational performance. Further this report talks about employee engagement and high performance working in order to generate an insight about the argument to establish a link between employee and engagement, high performance practices and organizational performance. Furthermore the report highlights the suggestions of managers so that such an environment is created where the employees are motivated such that they perform better. Meaning of Employee Engagement According to Gallup and other researchers employee engagement is a force that drives performance outcomes. His research shows that engaged employees are more productive, profitable, more customer-focused, safer, and more likely to withstand temptations to leave (Gallup, 2010). Most of the companies now adhere to the fact that maximum productivity comes not from a ‘satisfied’ or ‘happy’ employee, rather it comes from one who is the most loyal and most productive, both at the same time. Hence these two factors present in an employee make him the engaged employee. An engaged employee gives his 100 percent, is intellectually and emotionally attached to the organization, is well informed about his goals and feels strong about his values. Robinson Perryman and Hayday believe that employ engagement is the positive attitude which is held by the employee towards the organization and its values. An engaged employee is well aware of the context of the business and they maintain a good relationship with their colleagues so that it will prove to be a benefit for the organization (Theoretical Perspectives of Employee Engagement & Organisational Performance). John Purcell further focuses on the fact that it’s the relationships and behaviors of the colleagues in an organization which binds everyone and makes them engaged and more intending to stay and work for the organization. Therefore we need to work hard to build organizations and cultivate a sense of community in them (Purcell). In order for employee engagement to take place, the organization too plays a major role in respecting the personal aspirations and ambitions of the employees. According to the global studies, there are three basic aspects related to the employee engagement. Firstly it says talks about the unique psychological makeup and experience of the employees. Then comes the ability of the employers to create such conditions that promote employee engagement. Furthermore it talks about the interaction which takes place between the employees at all point in times (OPC). The interest in engaged employees is more now because the employers wants improved business performance. They want the employees to understand how is their work contributing to organizational outcomes. In addition, management strategies of people and the policies need to be aligned with the wider business. Furthermore, a positive psychological contract is to be promoted by the employer, with the help of which the expectation are fulfilled and exceeded of both the parties in the relationship of employment (CIPD). According to Robinson et al, the traits of employee engagement are quite similar to that of organizational citizenship behavior. However a very evident difference between the two is that employee engagement allows a two-way interaction between the employee and the employer. In organizations where the theory of employee engagement is ultimately put into practice are the ones which provide a great deal of insight in the practical understanding of the concept. The degree of satisfaction and trust among employees with respect to their jobs is referred as employee engagement by Johnson and Johnson. Employees who are engaged have a sense of feeling valued and they tend to stay longer with the firms. As a result they continuously try to do better and prove to be an asset for the firm, innovating new ideas and improving the organizational performance of the firm. Hence this leads to a well performing firm which is high on productivity along with there is an increase in the workforce. Therefore engaged employee are motivated towards performing well and being a source of maximum productivity of the firm, aiming to stay longer in the firms, developing a high degree of relationship with their colleagues, in return to high productivity they have flexible working conditions and healthy work environment. High Performance Work Organization There is a lack of ability in managers in assessing the fact whether their organization is a high-performance work organization (HIPO).It is one of the most recent and important concepts to be discussed. However there are five components that lay the ground work for describing what exactly are these high-performance work organizations. The Five components are, self-managing work teams, employee involvement, participation and empowerment; total quality management; integrated production technologies; and a learning organization. Therefore an organization will lead itself towards the goal of high performance only if it understands about the integration of these components (Kirkman, High-Performance Work Organizations:Definitions, Practices, and an Annotated Bibliography). The involvement of employee forms all the basis of organizations giving high performance. Therefore this legislation has to be supported by DTI and other partners. According to them the employers should put enough resources in the fields of training managers and developing so that the managers shall become effective people managers instead of just task managers. By visiting other organizations an experience of effective employee involvement can be provided. Job enrichment and self managing teams are the most effective. Therefore employee involvement practices should be used. The polices which have been adopted for employee engagement by the organization should be clearly stated and they should be unambiguous, so that the employees would be well aware of them and as a result they are committed to high performance work. The employers should also use the effective two-way communication method frequently (Chartered Management Institue, 2002). High Performance work organizations ensure that the employees who work in teams and develop high levels of trust, communication, employee involvement, and learning should have higher levels of autonomy. Employee engagement enhances organizational performance Good working environments are as a result of employee engagements. According to Murlis, engaged performance is defined as a result that has been achieved by stimulating the enthusiasm of employees for their work and directing it towards the success of an organization. According to McBain, conceptualizing and measuring the impact of human capital in organizations and in the integration of several aspects of HR such as employee satisfaction, commitment, motivation, involvement, psychological contract, job design, and reward, can be seen through the most important factor of employee engagement. According to the Chartered Institute of Personal development (CIPD), engaged employees are demanded for by the employers because of the improved business performances delivered by them. In addition to this, the employees need to understand the nature of their work and how it contributes to the organizational outcomes (MEEOP). In reality, the employers are interested in just one thing which is how are the individuals performing and how much is their contribution towards organizational performance. In addition to this they want to make sure all the time that the employees are being efficient and productive (Theoretical Perspectives of Employee Engagement & Organisational Performance). Economic disruption is something which comes and goes. The method of handling such disruptions shows how well an organization is performing, and how long will it survive for. During the uncertain turbulent times, many companies focuses on the fact of how to cut the costs, by cutting salaries, bonuses, rewards and development costs, and they have been less focused on how to manage their talent and engage their employers. Many of the business leaders who do not speculate a successful business and are short sighted may not value engaged employees, and they think that the employees have less options and that they will remain in the business because they are in need of job security. On the other hand, smart and such businessmen who are long sited, believes that while they may need short term solutions to cut costs, they should also focus and identify the long term solutions such as talent management strategies which will help them remain in the business for a longer time. In order for a business to excel, it has to create such an environment where the employees understand, and they further commit themselves to the ultimate goals, directions and strategies of the company. This indeed requires a lot of coordinated effort and make sure that all the foundations have been structured firmly and is helping in promoting the company. Engagement is seen to be two way process between the employers and the organization. The organization will be more likely to engage such employees who would give them an additional advantage (LEADERSHIP INSIGHTS). The level of customer satisfaction and the response of customer, how well the customer is doing also effectively measures the organizational performance. In addition to it the organization can have an idea where there product stands, since the standards are also judged by the customers. The attitudes and behaviors of employees at work, along with the staff turnover has been greatly affected be employee engagement. The overall organizational performance is influenced by employee productivity. In fact a number of studies suggest that employee productivity and engagement has a direct correlation. Towers Perrin, conducted a research recently in 2007, in which it was evident that firms witness an increase in their operating incomes by approximately 19 percent, and their earnings of share per 28 percent on a yearly basis, if they exhibit higher percentage of engaged employees. Therefore employee engagement is extremely important in order to improve the financial performance of an organization. Different levels of employee engagement have different relations with the firms. It is noticed that the financial performance of firms is significantly varied with different levels of employee engagement. In the study which was carried on by Towers Perrin, the observations which were made on employees across 50 companies on various sectors and industries to compare the financial performance of organizations with a highly engaged workforce to their peers with less engaged workforce over a 12 month period, thus these observations are strongly supported. There came a need for a new form of organization known as ‘high performance work organization’ due to the growing need for employee engagement. The conventional organizations never thought that the employees were able to give autonomy to, therefore never was autonomy given to them. There was a study carried out which revealed that those organizations who have high work practices and which exhibit higher work performance usually witness higher levels of employee engagement as compared to those organizations which exhibits average working performance levels. Therefore it is suggested that the companies deliver their goals and achievements clearly to the employees on a regular basis. It is extremely important that the organizations share their business success with their employees, as this creates a sense of belongingness, and establishes a strong connection between their work and the overall organizational success. In this way the employees understands their responsibilities in a much defined manner along with the understanding of the contribution to the overall organizational performance, therefore, this leads to improved engagement levels. The Gallup Organization has also carried out considerable level of research and analysis in measuring factors that contribute to employee engagement, with revenue and revenue growth the aspects being focused on and customer satisfaction in a survey conducted, which involved several organizations; it was observed that all those business units that have employee engagement above average, were experiencing a significantly higher profitability of success. This was very great than those business which had a below average engagement of employees. In the US, this other survey was carried out which revealed about 24 companies that were listed on the stock exchange. The stocks of these companies were traded actively, with employee strength greater than 250,000 employees conducted over the last five years, observed, that the prices of the stock were relatively higher, and this was correlated to the employee morale in the company. The stock increased by an average of 19.4% in 11 companies with the highest employee morale, whereas it remained to 8 for the remaining 13 companies which experienced relatively lower employee morale. Watson Wyatt concluded that a firm who has employees who are motivated morally and consider that they are an integral source to the firm posts much better financial numbers than most of the firms, after conducting a comprehensive study of 115 firms. These firms have negotiable employee attitudes because of which he quantitatively estimates that these firms typically achieves a financial performance 4 times better than those firms who have poor employee attitudes. A further study was carried by Towers Perrin reveals that there is a powerful positive correlation between sales growth and employee engagement, lower cost of goods sold and overall customer focus. This study was based on 35000 employees. Therefore this suggests that the overall organizational performance will be positively impacted if it will depend on these factors. The customers are treated in a good manner because of the great feeling of valued and a sense of security by the engaged employees. Hence this efficiency leads to an overall increase in the customer revenue leading to revenue growth. Hence high performance work organizations works on such factors that strengthens employee involvement. Role of Managers/leaders in achieving engaged workforce The phenomenon behind employee engagement and a strong impact of organizational performance is effective leadership. The notions of leadership however are being affected by what is happening in the society, including social, technological, economic and political change. Private companies are investing thousands of dollars in interventions that increase levels of employee engagement. Purcell et al talks about the link between people management and better organizational performance. The main purpose of this link is to gain the commitment of employees towards the organization, what is widely known as engagement and it helps in achieving high levels of job satisfaction. In order to learn the job, teamwork plays a vital role in the process. In a teamwork, the employees have to agree with the other team members and often learn shortcuts and better ways of doing their jobs, Hence this shows that the team leaders, who are like front line managers, are the critical agents since they are the ones who can create effective team functioning. Then there is this strong bonding between the effective provision of coaching and guidance by the lobe manager and levels of employee commitment. Hence the coaching and guidance done by the manager is a fundamental learning activity. Line managers help in structuring and delivering learning opportunities. Conducting performance appraisals and agreeing on development plans are all in the hands of these line managers (CIPD). It is the responsibility of managers to develop a sense of personal responsibility in order to direct their reports to work towards shared organizational goals. It is the managers who plays the crucial role and develops a shared and clear vision for the entire organization. It is very important for employees to have a clear understanding of the organizations strategic direction in order to develop an engaged workforce. By communicating the vision and the strategic direction of the firm along with empowering the employees, it is the manager’s role to provide direct reports and a clear understanding of their responsibilities and also about their contribution to the overall success of the firm. Leadership is the face of the organization for its employees, so it is important that the leadership have a effective relationship with the team and the team should have a clear understanding of their responsibilities, the relationship between a manager and his direct report is highly crictical as a manager and the direct report interacts with each other on a regular basis, so the manager has to lead by example and show high level of commitment with the task and a proactive attitude and critical decision making for the success of the organization , acting as role models and be able to inspire through their actions /strong decisions. Good managers encourage team work and accountability of the actions of each member in the team giving them a sense of responsibility for their actions, from a recent study it shows leaders should focus on team efforts to strengthen employee engagement, hence responsibility for their actions, if the Manager is clear about his responsibilities he is able to effectively communicate the company’s goal to the team , clear communication of the organizational performance and its strategic direction are important for an engaged workforce as the employee can see their contribution in the overall firms success which makes them motivated. Manager must also be able to provide clear and honest feed backs to their subordinates, it is noted employees perform better if their team leaders knows them better and the employees are better informed of the company policies, reward system and recognition from immediate management increases the employee engagement, clear feedback and recognition of employees efforts also helps in al round development and will foster commitment and engagement in their minds another key role of the manager is to keep every employee aspirations inline with the business direction. A good Manager will recognize the performer and call him out consistently able manager recognizes performers the employees who align their target according to the companies targets, and to keep these kinds of employees happy special awards/incentives should be planned for them in order to retain and reinforce the employees trust in the company keep them engaged. Standard Chartered bank realized the great importance of employee engagement ,they have been able to achieve superior employee engagement by concentrating on the effectiveness of the manager-subordinate relationship, the bank focuses on a developing manager who are effective leaders who are than trained to manager people which makes sure they are astute in dealing with their subordinates. The Bank has developed a special program called great manager program GMP, this program provides a diverse set of plans and methodologies required by the manager to effectively manage their reports. This programmed also provides online tools and strategies to align the manager’s objectives with to a structured communication approach and to ensure that manager’s communication with their subordinates is clear and effective. The managers have to lead by example and make a culture which supports the developments and growth of the employees this will instill the feeling of belonging towards the company and a feeling that the company gives importance its employees. Managers play a big part in the development and training of the employee , which increase the loyalty of the employee as he feels motivated and studies have shown if the management has given the employee ample time to groom and develop himself the more the employee proves to be a better performer. A Manager need to realize the importance of the employee training and grooming and pay special attention to it whenever a need arises, further it shows that good managerial skills / leadership behavior which shows organizations commitment towards Its employees their development giving them a chance to raise voice on a important issue makes them feel valued and increases loyalty and motivation to achieve better results hence employee engagement help in all levels of employee satisfaction and all the managers should be adequately trained in managing people and situations in work place environment. Managers should apply different laws of engagement during the daily work practices and these engagements should be visible throughout the organization. And the managers should make develop a powerful engaging culture based on strong leadership values. Conclusion No one person or group of people in an organization can control the organization culture entirely. However If the leaders in the organization lead by example, the culture can be influenced to drive engagement, leaders can uphold, can show and make them realize that the employees are important, and help them attain healthy work life balance, reviewing compensations fairly, encourage honesty and integrity etc. however measurement of engagement cannot be done from one or two of these factors, but in for the culture of engagement all would be needed. No leader or group of leaders can actually control the organizations culture entirely. However the culture can be influenced in ways that will drive engagement. At least one task the senior managers/ leaders can uphold is that they can show and realize that they value the employees, Other tasks could include making corporate social responsibility a strategic imperative, reviewing work processes and the lines of communications which are to support employee empowerment and a healthy wok-life balance, reviewing compensation policies to ensure fairness and focusing on measures to increase customer satisfaction. The measurement of engagement cannot be done by any of these factors directly, but to a culture of engagement, all would contribute Bibliography Chartered Management Institue. (2002). HIGH PERFORMANCE WORKPLACES THE ROLE OF EMPLOYEE INVOLVEMENT. CIPD. (n.d.). Learning and the Line. Learning and the line The role of line managers in training, learning and development , 3-5. CIPD. (n.d.). Why the Interest in Employee Engagament. Theoretical Perspective of Employee Engagement & Organisational Performance . Gallup. (2010, 12 20). Retrieved 12 21, 2010, from Employee Engagemnt: http://www.gallup.com/consulting/52/employee-engagement.aspx Gatenby, M. (n.d.). Research Insight. 2. Kirkman, B. L. (n.d.). High-Performance Work Organizations:Definitions, Practices, and an Annotated Bibliography. Retrieved 12 21, 2010, from http://www.ccl.org/leadership/pdf/publications/readers/reader342ccl.pdf Kirkman, B. L., & Lowe, K. B. (n.d.). LEADERSHIP INSIGHTS. Employee Engagement. MEEOP. (n.d.). The Changing Nature Of Performance Management And Its Importance In The Current Economic Climate. OPC. (n.d.). Retrieved 12 20, 2010, from How do You define Employee Engagement: http://www.opcuk.com/downloads/defining_employee_engagement.pdf Purcell, J. (n.d.). Building better Organizations. Reflections on Employee Engagement , 3-4. Theoretical Perspectives of Employee Engagement & Organisational Performance. (n.d.). Read More