The Relationship between Employee Engagement and Organisational Performance - Literature review Example

The relationship between employee engagement and organisational performance Introduction Employee engagement can be defined as the intellectual and emotional commitment of an employee to an organization and its success (Richman 2006; Shaw 2005). It can also be defined as the extent in which employees believe in the values, purpose and vision of an organization and demonstrate their commitment through their attitudes and actions towards their employer, colleagues and their clients (Cook 2008).Employee engagement is reflected through a natural enthusiasm and passion for the company, its services or products that it provides. Employees who are engaged to their organization experience a compelling meaning and purpose in their work and put their best effort towards the achievement of organization’s goals (Frank et al 2004). Cook (2008) observes that employee engagement is more of a “psychological contract” rather than a physical contract. Employees who are engaged are inspired by their work, they are customer oriented and care about the future of the company. A number of studies suggest that there is a close link between employee engagement and organizational performance (Baumruk 2004).For instance, Federman (2009) accentuates that employee engagement can help to enhance employee performance, increase profits and increase customer loyalty. The concept of employee engagement is relatively new however over the course of time it has gained momentum and has been marketed by human resource consulting companies that give advice on how it can be developed in order to increase the performance of organizations (Macey & Schneider 2008). This paper seeks to provide an incisive literature review on the relationship between employee engagement and organization. It will provide a review of various literatures that depict a link between employee engagement and organizational performance. Foremost this paper will define employee engagement and examine different models and theories of employee engagement. Subsequently, it will depict the impact of employee engagement on organization performance. In addition, this paper will discuss the limitations of studies conducted on the relationship between employee engagement and organisational performance. Employee engagement defined In academic literatures there are various definitions of employee engagement. Kahn (1990) defines employee engagement as the harnessing of workforce members to their work roles, physically and psychologically. Similarly, Rothbard (2001) defines employee engagement as a psychological involvement of employees to their work however he goes further to explain that employee engagement involvement involves two significant components namely; absorption and attention. According to Rothbard, attention entails the cognitive availability and amount of time spent thinking about one’s role. On the other hand, absorption refers to being engrossed to a particular role or the intensity of focus towards a role (Rothbard 2001). According to Maslach et al (2001), employee engagement is characterized by efficacy, involvement and energy. Schaufeli et al (2002) note that, employee engagement is a positive and fulfilling work-related state of mind that is epitomized by absorption, dedication and vigor. They further observe that this state of engagement towards work is not momentary in a specific state instead, it is more pervasive and persistent and is not focused on a particular object, individual, event or behaviour (Schaufeli et al, 2002). Employee engagement models and theory There is limited research in the area of employee engagement and a result few models or theories in this area have been developed. Nevertheless, there are two main research studies that offer models on employee engagement. In his qualitative research study Kahn (1990) focused on the psychological conditions of employee engagement and disengagement in the work place. Khan interviewed counselors and members of a workforce in an architecture firm with regards to their moments of engagement and disengagement while they were at work. Kahn established that there were three main psychological conditions that were linked to their engagement and disengagement at work. These conditions include; safety, availability and meaningfulness. He found out that employees were more engaged at work when they were offered psychological meaningfulness, psychological meaningfulness and when they are psychologically available (Kahn (1990) .May et al (2004), conducted an empirical study to test the relevancy of the model proposed by Kahn (1990). Similarly, May et al (2004) established that safety, availability and meaningfulness played a great role in promoting employee engagement. Furthermore, they established that factors such as role fit and job enrichment promoted psychological meaningfulness. Supportive employee relations and reward were established as positive predictors of safety whereas the availability of resources helps to enhance psychological availability. On the other hand, May et al (2004) established that factors such as self-consciousness and co-worker norms to be negative predictors of employee engagement. The other model of employee engagement is based on the burnout literatures which depict that work engagement is a positive antithesis to burnout since burnouts entail the erosion of engagement in the course of work (Maslach et al 2001). Maslach et al 2001 note that there are six factors that contribute to engagement and burnout , these factors include; control, workload, recognition, rewards, support, values and perceived fairness. They argue that employee engagement can be associated with feelings of control and choice, a sustainable workload, reward and recognition. Despite the fact that both models by Maslach et al (2001) and Khan (1990), show that antecedents or psychological conditions help to promote employee engagement , these models do not illustrate why employee will respond to these antecedents with different degrees of engagement or work performance. The Social Exchange Theory (SET) provides a stronger theoretical rationale in explaining the relationship between employee engagement and organisational performance. According to the SET obligations can be generated through a set of interactions between parties who have a form of reciprocal interdependence. A general tenet of this theory is that relationships evolve with time into loyal, trusting and mutual commitments if parties adhere to a certain “set of rules” of exchange (Cropanzano & Mitchell 2005). These rules of exchange often entail repayment or reciprocity such that the conduct of one party contributes to an action or response from the other party. For instance, when employees receive socio-emotional and economic resources from their organization, they often feel obliged to respond in kind so as to repay the organization (Cropanzano & Mitchell, 2005). Similarly, Robinson et al (2004) describes the relationship between employee engagement and organisational performance as two way relationship between the employer and the employees. One way in which employees can repay their organization is through their engagement and performance at work. Employees will decide to engage themselves in work to a certain extent depending on the resources that they receive from the organization. Therefore based on the different model and theories of employee engagement, the level of cognitive engagement is dependent on the socio-emotional and economic resources that they are offered by their employers (Robinson et al 2004). The impact of employee engagement on organisational performance One of the main reasons behind the popularity of employee engagement in organizations is that it can be linked in organizational performance and other positive outcomes. There is a general belief that there is a close link between employee engagement and increased organizational performance. (Harter et al 2002). There are various reasons why employee engagement has been linked to organizational performance. Foremost, employee engagement is often described as a positive and fulfilling work experience (Schaufeli and Bakker 2004; Sonnentag 2003). Employee engagement has also been linked to positive work effect and good health (Sonnentag 2003). These positive emotions and experiences are likely to bring about positive outcomes at work. As expressed by Schaufeli & Bakker (2004), engaged employees are bound to have a great attachment to their organization and a lower tendency to abandon the work in the organization. Based on the SET, when all parties adhere to the exchange rules, there is bound to be a more loyal, trusting and mutual commitment (Cropanzano & Mitchell, 2005). Therefore, employees who continue to engage themselves do this mainly because of suitable reciprocal exchanges. Consequently, employees who are engaged are bound to have high-quality and trusting relationship with their employer and as a result they are more likely to have positive attitudes towards work and this will be reflected in their work performance. Moreover, there are some empirical research studies which show the relationship between organization outcomes and employee engagement. For instance employee engagement has been found to have positive related outcomes to organizational commitment and negative related outcomes to high employee turn over. It has been established that employee engagement is related to wok outcomes such as organization commitment, extra-role performance, job performance and job satisfaction (Schaufeli and Bakker 2004; Sonnentag, 2003). Employee engagement ensures that employees give it their all. A number of research studies portray a strong connection between the level of employee engagement and the level of their quality work performance. According to Bernthal (2009), employee engagement consists of focused work and individual value. Engaged employees make unique contributions and are empowered to use the available opportunities to contribute to their personal growth and the success of the organization (Bernthal 2009). Research studies on employee engagement employ various approaches. For example, the global work force, a research study carried out by Tower Perrins on employees in different companies showed that only a fifth of the respondents were engaged. The study revealed that, companies with high employee engagement realized more than 3% net profit as compared to companies with low employee engagement (Perrin 2008). The Gullup organization (2004) established close links between employee engagement and customer loyalty, profitability and business growth. In their study, they compared the results of these variables among a sample of stores that scored in the top 25% on customer loyalty and employee engagement and stores that scored bottom of 25%. Stores that were in the bottom 25% under-performed significantly across productivity measures such as employee turnover, sales and customer complaints. Similarly, the International Survey Research (ISR), established encouraging evidence with regards to the relationship between employee engagement and organizational performance. According to the ISR research findings employee engagement helps to boost the achievement of the overall organizational goals and objectives (ISR 2004). With reference to the Gallup findings, Otto (2007), further extended the findings in the Gallup research by establishing that high employee engagement in the work place contributes to higher earning per share (EPS) especially in public-traded companies. When compared with market competitors at the company level, companies which have more than four engaged employee for every one disengaged employee experienced 2.6 times more growth in the company EPS than companies with a ratio less than one engaged employee for every one disengaged employee. These findings can be regarded as reliable since the variability in differing companies was controlled by comparing every company to its competition and the EPS patterns across time were also explored due to a bouncing decrease or increase that is often common in EPS (Otto 2007). Despite the fact that this study does not show the role played on a daily basis by business leaders and investors to develop employee engagement, the findings of this study demonstrate the differences in the overall performance between companies. The Gallup’s meta-analyses portray strong evidence that a highly engaged work force outperform companies with low employee engagements. Moreover, the meta-analyses study depicts that business units with highly engaged employees have 12 per cent higher profitability, 18 percent higher productivity and 12 percent higher customer advocacy than business units with low employee engagement. Conversely, business units with low employee engagement experience 51% employee turnover and 62% more accidents than companies with high employee engagement. The focus of this research on EPS to a great extent provides significant evidence that employee engagement correlates to better business outcomes and organizational performance (Ott 2007). Cook (2008), observes that a 10 percent increase in employee engagement can contribute to a 6 per cent increase in customer satisfaction and a 2 percent increase in profitability. Robinson et al (2004) identified key behaviours associated with employee engagement that inevitable contribute to better organizational performance. These behaviours include; a strong desire to make things better, willingness to go an extra mile , understanding the business context, keeping up to date with the developments in the field and being respectful to colleagues and employers. These behavioral traits are not only indicators of employee engagement, they are also some of the behavioral traits that contribute to the overall performance and success of an organization (Robinson et al 2004). Furthermore the research study by Robinson et al (2004) established that employee engagement is closely related to perception and feelings of being involved and valued. Some of the key drivers of employee engagement include; two-way communication, effective leadership, high level of internal cooperation, commitment to the well-being of employees, a focus on employee development and accessible human resource policies. These aspects not only promote and help to develop employee engagement but they also contribute to better employee performance in the workplace thus promoting the achievement of organizational goals. It is therefore safe to conclude that the attributes and drivers of employee engagement correlate with the drivers and an organizational culture that promote better organizational performance. It is therefore evident that there is a strong link between employee engagement and organizational performance (Robinson et al 2004). Study limitations One of the key limitations of this study revolves around establishing the meaning of employee engagement. The descriptions of employee engagement are ambiguous among both practitioners and academic researchers. The concept of employee engagement is used in different contexts to refer to traits, psychological conditions, antecedents, outcomes and behaviour. The diverse literatures reviewed in this study portray employee engagement as either behavioral engagement, psychological engagement or trait engagement. This in turn brings about confusion with regards to the definite meaning of concept of employee engagement (Macey & Schneider 2008). Although employee engagement has over time become a popular topic among human resource practitioners and consultants and it has been linked to organizational performance, there is practically no substantial empirical research on the relationship between employee engagement and organizational performance in organizational behavior literature. As a result, this has brought about speculations that the concept of employee engagement might just be a “fad or flavor of the month” with little basis in research and theory (Saks 2006). Conclusion Based on the various literatures reviewed in this study, it is evident that there is a close link between employee engagement and organisational performance. Employee engagement is reflected through a natural enthusiasm and passion for the company, its services or products that it provides. Employees who are engaged to their organization experience a compelling meaning and purpose in their work and put their best effort towards the achievement of organization’s goals (Frank et al 2004). The Social Exchange Theory (SET) provides a stronger theoretical rationale in explaining the relationship between employee engagement and organisational performance. According to the SET, when employees receive socio-emotional and economic resources from their organization, they often feel obliged to respond in kind so as to repay the organization (Cropanzano & Mitchell, 2005). A review of various literatures established that employee engagement has a positive impact on the overall organizational performance (Cook 2008; Ott 2007; ISR 2004; Robinson et al 2004). Nevertheless, in a much as employee engagement has gained prominence amongst human resource practitioners and consultants, there is practically no substantial empirical research on the relationship between employee engagement and organizational performance in organizational behavior literature(Saks 2006). It is therefore essential that further research should be carried out in this field so as to establish the relationship between employee engagement and organisational performance. Bibliography Baumruk, R., 2004, “The missing link: the role of employee engagement in business success”, Workspan, Vol. 47, pp. 48-52. Bernthal, P., 2009, Measuring Employee Engagement, Development Dimensions International, Inc, Retrieved on July 8, 2011 from Cook, S., 2008, The essential guide to employee engagement: better business performance through staff satisfaction, Kogan Page Publishers, New York. Cropanzano, R. & Mitchell, S.,2005, “Social exchange theory: an interdisciplinary review”, Journal of Management, Vol. 31, pp. 874-900. Frank, D., Finnegan, P. & Taylor, R., 2004, “The race for talent: retaining and engaging workers in the 21st century”, Human Resource Planning, Vol. 27 .No. 3, pp. 12-25. Federman, B., 2009, Employee engagement: A roadmap for creating profits, optimizing performance and increasing loyalty, John Wiley and Sons, New York. Harter, K., Schmidt, .L. & Hayes, .L., 2002, “Business-unit level relationship between employee satisfaction, employee engagement, and business outcomes: a meta-analysis”, Journal of Applied Psychology, Vol. 87, pp. 268-79. ISR, 2004, International Survey Research, Retrieved on July 9, 2011 from Kahn, A., 1990, “Psychological conditions of personal engagement and disengagement at work”, Academy of Management Journal, Vol. 33, pp. 692-724.. 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Sonnentag, S., 2003, “Recovery, work engagement, and proactive behavior: a new look at the Interface between nonwork and work”, Journal of Applied Psychology, Vol. 88, pp. 518-28. Schaufeli, B., Salanova, M., Gonzalez-Roma, V. & Bakker, B., 2002, “The measurement of engagement and burnout: a two sample confirmatory factor analytic approach”, Journal of Happiness Studies, Vol. 3, pp. 71-92. Schaufeli, B. & Bakker, B., 2004, “Job demands, job resources, and their relationship with burnout and engagement: a multi-sample study”, Journal of Organizational Behavior, Vol. 25, pp. 293-315. Shaw, K., 2005, “An engagement strategy process for communicators”, Strategic Communication Management, Vol. 9, No. 3, pp. 26-9. Richman, A., 2006, Everyone wants an engaged workforce how can you create it?”, Workspan, Vol. 49, pp. 36-39. Robinson, D., Perryman, S.& Hayday, S., 2004, The Drivers of Employee Engagement, Institute for Employment Studies, Brighton. Rothbard, P., 2001, “Enriching or depleting? The dynamics of engagement in work and family roles”, Administrative Science Quarterly, Vol. 46, pp. 655-84. Read More