Employment Relationships Impact on the Overall Success of an Organisation - Case Study Example

Introduction In the theory of economics, the central theme is the study of the market and its behavior. In the description and prediction of this central theme, we naturally consider the market players/actors which can be broadly categorized into three: the consumers, the suppliers and the government as an arbiter. When we speak about the suppliers, the first thing that comes to our minds are the large firms which has its headquarters in a certain place and who manufactures a type of material using a certain process. But we are actually missing the bigger picture. That is, we are unable to appreciate the people which make the firm functional – the employees and the employer. Although it might be argued that the employer is the source of all the funds which makes the firm operational, the firm is still, by and large, operated by the employee. The increase in international competition and the rapid technological advances are favoring organizations which are more efficient, innovative and productive. These external factors are forcing firms to alter their administrative and management structures. The intensified pressures have generated major challenges in managing employment relationship (Noer, 1993; Herriot, Manning and Kidd, 1997). The basic principle behind the concern for this field is the ‘friendlier’ and ‘more responsive’ the employee governance system is, the greater will be the probability of employees being actively engaged in their work. The idea stems from the notion that, as you build trust and friendship with and among the employees, the employee will reciprocate the effort thru his work. In this paper, we will be exploring whether there is truth in this claim. The Three Types of Employees Employees joining an organization are usually characterized by enthusiasm, commitment and advocacy for their new employer partly because of the thought of receiving a salary and partly due to the pride of belonging to an organization and doing something productive. Suffice it to say, at the start of employment, they are highly engaged. When we say highly engaged, we mean that they are actively participating in the organization.  But after a year or so, employees tend to assume one of the three characteristics enumerated below (Wayne, Shore and Liden, 1997): 1. Engaged employees who works passionately and feels a profound connection to their company. These people drive innovation and move the organization forward. 2. Not-engaged employees are those who have essentially become disinterested with their work. They spend time but not energy and passion into their work. They are not necessarily negative or positive about their company but they take a wait-and-see attitude toward their job, their employer, and their co-workers. The commitment is simply not there anymore. 3. Actively disengaged employees are the complete opposite of engaged employees. These people act out their happiness and will tend to undermine the accomplishments of other co-workers. Knowing that these are the case, it behooves us then to determine what can cause the levels of engagement to increase or decrease. Make or Break: The Employer Factor Many empirical studies have demonstrated a relationship between employer and outcomes of job satisfaction and organizational commitment. The research conducted by Guest et al and that of Robinson and Rosseau indicate a direct relationship between employer contract behavior employee commitment. They found out that reciprocity does operate indeed. While employer fulfillment of duties and responsibilities for his employees, such as strict adherence to the contract signed, do instill a sense of commitment, the reverse is also true. Disengagement ensues from profit centered, unconcerned and outward breach of contract attitude (Guest et al, 1996); (Robinson and Rosseau, 1994); (Robinson, 1996). Robinson and Morrison as well as Coyle-Shapiro and Kessler also found that employees do tend to fulfill their duties if the employer also carries out his duties to the employees without fail (Robinson and Morrison, 1994); (Coyle- Shapiro and Kessler, 1998). These studies only show that it is basically the employer which determines the degree of engagement of an individual. Greenberg as well as McNeely and Meglino forwarded the idea of social exchange as the mechanism that explains why employees tend to perform better when they are treated better. The social exchange concept, in this context, states that employees seek to reduce the level of indebtedness through reciprocation efforts directed to the source of benefits (Greenberg, 1990; McNeely and Meglino, 1994). From the discussion, it can be seen that performance depends on how the employer takes care of his employees. This brings us to the concept of organizational support. Organizational Support Employees can be considered as the front-liners of the business and through their work the organization succeeds or fails. However, the efficiency and productivity of these people is often determined by an employer which usually serves as the ultimate key manager. When few employees know how to perform their jobs, when there is high turnover, or when employees work ineffectively, they become a liability and put the organization at a competitive disadvantage. The major determinant for the three types of employee attitude towards work is the employer support. In management studies, individual performance is determined by Ability, Effort and Support. In many work environments the emphasis tends to be confined only in ability and effort with support usually neglected. This was brought about by the notion that the employee was taken in the company because he has the skills and abilities for the job. This being the case, they are expected to carry on with their work without minimal supervision and engagement of the employer. However, Eisenberg argued this should not be the case. According to him, the degree of perceived organizational support is also directly related to employee commitment and job satisfaction (Eisenberg et al, 1986). Eisenberg characterizes the concept of perceived organizational support as the general perception concerning the extent to which the organization values employees’ contribution and cares for their well-being (Eseinberg et al, 1990). According to this concept, high levels of perceived organizational support create the initiative for employees to reciprocate the support. This may come in the form of organizational commitment and organizational behavior. This has been verified in other studies (Settoon, Bennet and Liden, 1996); (Shore and Wayne, 1993). The principle behind Eisenberg’s argument is that high levels of organizational support generate an obligation on employees to reciprocate the donor of the benefits. Organizational support can be provided in many forms: training and development, promotions, equipment and technology, setting of clear performance standards, support from management and co-workers, greater compensation, medical benefits and many more kinds of benefits. In the study conducted by Fasolo, Human Resources practices such as training, development experiences and promotions were positively linked with employee commitment and performance although this should not have come as a surprise (Fasolo, 1995). The basic principle behind the positive relationship is that when employees see that their employer is genuinely caring for them instead of pursuing only profits, human nature would dictate them to also care for the employer. The study of Wayne, Shore and Linden also delve on the same topic as Fasolo and they were also able to establish a positive link (Wayne, Shore and Linden, 1994). In 1997, they extended the study to include justice in compensation and decisions regarding an event. They found that these ‘support’ provided by the organization also serves as an impetus for better employee performance (Wayne, Shore and Linden, 1997). This may not also come as a surprise because human nature will naturally incline the person to do his best to reciprocate the salary, keep his job and even gain another increase in salary. Another study conducted under the auspices of The Center for Corporate Culture and Organizational Health supported the idea that healthier organizational cultures are more likely to: reduce workforce turnover and stress; improve employee health, productivity, performance, and retention; and lead to significant improvements in business results. The investigation of research evidence revealed a range of positive effects associated with the wisdom of investing in the health and well being of people in the workplace ( Levey et al, 2003 ) Explaining Changes in Engagement With all that has been said, it can be easily deduced that changes in degree of engagement arises when specific obligations and support expectations are not met. When this happens, it sends a signal or message to the employees that they are not positively valued by the organization consequently eroding perceived organizational support. The non-fulfillment of perceived obligations and support negatively affect employees’ perception of the organization’s commitment to them. As a consequence of feeling unfairly treated or experiencing injustice in terms of outcomes received, employees reduce their commitment ( Robinson and Morrison, 1995). The reduction in commitment translates to low-quality production or no productive work at all. Consider for example, two individuals entering an organization as an employee. To facilitate our discussion, let’s say that they have both achieved the same level of educational background and achievement and they both qualified as a junior associate of under the same department. After a year, employee A gets promoted and was made eligible for a scholarship abroad while employee B remains in the same position. What would we naturally expect be the reaction of employee B towards the organization? How would this affect his productivity? Employee B would be more inclined to be disgruntled with the company rather than inspired to perform better given that they were under the same department and consequently having the same achievements. The feeling of neglect now consumes Employee B. After another year, Employee B remains in the same position with the same salary and Employee A now head of the department. Because of this repeated neglect of obligation of the company to provide career development for the individual, employee B will surely be dissatisfied with company (this is assuming that the performance levels of A and B are the same). The dissatisfaction will surely make B assume the characteristics of category 2 and in the worst case, category 3. Employee B reduces his productivity and becomes a liability to the company. All this, however, could have been avoided if only the employer ensured that the Employee B’s perceived organizational support was very much inspiring. Rather, the employer did not employ distributive justice and focus organizational support to Employee A alone. Conclusion All the discussion above is part of the concept of psychological contract which is the notion that an individual has a variety of expectations of the organization and the organization has a variety of expectations of him. (Arygyris, 1960); ((Levinson et al, 1962); (Schein, 1965) In a nutshell, what we have been trying to discuss is the importance of building and nurturing employer-employee relationships as it is a major determinant of the organization’s success. We now place the employee in the limelight in the same level as that of the customers. Customer satisfaction is not the only determinant of the success of the organization but the morale of the workforce as well. A 2003 Center for Corporate Culture and Organizational Health report Institute study found that in 1982, 62 percent of the organizations’ market value came from tangible assets: products, machines, buildings, and so forth. Only 38 percent came from intangible assets such as intellectual property, brand name, and the quality of the workforce. By 2002, the percentages had reversed. The vast majority of value is now comprised in a company’s intangible assets (Levy et al, 2003). The greater accessibility to information and improvements in education has made it easier for other competitors to develop a product similar or superior to the product/services of the company. But it is difficult to reproduce the aptitude, dedication, and creativity found within an engaged workforce. This is the organization’s creative edge. Although competitors may come up with the same product, the company can still win the competition not only thru intensive advertising campaigns but also thru the performance of its employees. That is, the employees can make or break the company. References: Arygris, C. (1960). Understanding Organizational Behavior. Homewood, IL : Dorsey Press Inc. Coyle-Shapiro J. and Kessler I. (1998). ‘The psychological contract in the UK public sector: Employer and Employee Obligations and Contract fulfillment’. In SJ Havlovic (Ed). Academy of Management Best Paper Proceedings. Eisenberger, R., Fasolo, P. and Davis-La Mastro V. (1990). ‘Perceived Organizational Support and EmployeeDiligence, Commitment and Innovation’. Journal of Applied Psychology, 75, 1, 51-59 Fasolo, P. (1995). ‘Procedural Justice and Perceived Organizational Support: Hypothesized Effects of Job Performance’. In Cropanzaro, R. and Kacmar, K. (Eds.). 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Englewood Cliffs, NJ: Prentice Hall. Wayne, S., Shore, L. and Liden, R. (1994). ‘An Examination of the Effects of Human Resource Practices on Leade-Member exchange and Perceived Organizational Support’. Presented in the Academy Management Meeting., Dallas, TX. Wayne, S., Shore, L. and Liden, R. (1997). ‘ Perceived Organizational Support Leader- Member Exchange: A Social Perspective’. Academy of Management Journal, 40, 82-111. Read More