Employee Engagement, Recent Trends and its Effect on Performance:

A Theoretical Review

 

Harilal. A1* and Dr. Santhosh V A2

1Lecturer, University Institute of Management, University of Kerala, Thiruvananthapuram, Kerala

2Associate Professor, TKM Institute of Management, Musaliar Hills, Karuvelil P.O, Kollam, Kerala

*Corresponding Author E-mail: harilalimk@yahoo.com

 


ABSTRACT:

Employee engagement is a widely accepted concept. The association between employee engagement and performance is explored through this article. Employee engagement influences the employee performance and in turn affects the performance of the organization. It also has got inevitable role in determining different employee related and organisational related factors like job satisfaction, business results, brand name, shareholder value etc. Different organizations exhibit different levels of employee engagement and is influenced by different external and internal factors. From the externally driven cultural and social elements to internally driven features of an organisation like its policy, attitude towards employees and the individual’s personality trait drives the engagement quotient of an employee. The study broadly reviewed the concept of employee engagement, linked it with different factors related to engagement, its recent trends and its effect on performance. The study also reviewing recent employee engagement trends in different part of the world.

 

KEYWORDS: Employee engagement, Performance, economic recession, productivity, employee turnover, job satisfaction

 


1. INTRODUCTION:

Employee engagement is a concept that has become increasingly mainstreamed into management thought over the last decade. The big surprise is that, there remains a paucity of critical academic literature on the subject, and relatively little is known about how employee engagement can be influenced by management. Although there is a great deal of interest in engagement, there is also a good deal of confusion. The concept is generally seen as an internal state of being that divided into physical, mental and emotional, that brings together earlier concepts of work effort, organizational commitment, job satisfaction and flow or optimal experience. Typical phrases used in employee engagement writing include, discretionary effort, going the extra mile, feeling valued and passion for work. This definition gives three dimensions to employee engagement (www.cipd.co.uk/hr-resources/factsheets/employee-engagement.aspx). Intellectual engagement – thinking hard about the job and how to do it better, Affective engagement – feeling positively about doing a good job, Social engagement – actively taking opportunities to discuss work-related improvements with others at work.

 

Engagement is a two-way process between employees and an organization. The organization attempts to engage employees who return a level of engagement to the employer. The engagement is more complex than this, and can be directed by employees in one of two ways or both. The first is the level of engagement employees have with their career or profession, and the other is the engagement employees feel towards their employing organization. In this competitive environment business need to do more with less, engaged employees may be the difference between surviving and thriving. The organizations are discovering new techniques for increasing organizations efficiency and scratching these techniques into the basket. In this situation the article is discussing about a stable concept employee engagement.

 

2. EMPLOYEE ENGAGEMENT:

The Employee engagement is derived from studies of morale or a group's willingness to accomplish organizational objectives which began in the 1920s. The value of morale to organizations was matured by US Army researchers during Second World War to predict unity of effort and attitudinal battle-readiness before combat. In the postwar mass production society that required unity of effort in execution and group morale scores were used as predictors of speed, quality and militancy. With the advent of the knowledge worker and emphasis on individual talent management, a term was needed to describe an individual's emotional attachment to the organization, fellow associates and the job. Thus the birth of the term "employee engagement" which is an individual emotional phenomenon whereas morale is a group emotional phenomenon of similar characteristics. In other words, employee engagement is the raw material of morale composed of 15 intrinsic and extrinsic attitudinal drivers                                 (www.scarlettsurvey.com, 2001). One of the first challenges presented by the literature is the lack of a universal definition of employee engagement. Thus in 1990‘s, Kahn (1990) defines employee engagement as “the harnessing of organization members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally during role performances”. The cognitive aspect of employee engagement concerns employees’ beliefs about the organisation, its leaders and working conditions. The emotional aspect concerns how employees feel about each of those three factors and whether they have positive or negative attitudes towards the organisation and its leaders. The physical aspect of employee engagement concerns the physical energies exerted by individuals to accomplish their roles. Thus, according to Kahn (1990), engagement means to be psychologically as well as physically present when occupying and performing an organisational role. Most often employee engagement has been defined as emotional and intellectual commitment to the organisation (Baumruk, 2004; Richman, 2006 and Shaw, 2005) or the amount of discretionary effort exhibited by employees in their job (Frank et al., 2004). Although it is acknowledged and accepted that employee engagement is a multi-faceted construct, as previously suggested by Kahn (1990), Truss et al., (2006) define employee engagement simply as ‘passion for work’, a psychological state which is seen to encompass the three dimensions of engagement discussed by Kahn (1990), and captures the common theme running through all these definitions. The existence of different definitions makes the state of knowledge of employee engagement difficult to determine as each study examines employee engagement under a different protocol. In addition, unless employee engagement can be universally defined and measured, it cannot be managed, nor can it be known if efforts to improve it are working (Ferguson, 2007). This highlights the problems of comparability caused by differences in definition. Furthermore, whilst it is acknowledged that employee engagement has been defined in many different ways, it is also argued the definitions often sound similar to other better known and established constructs such as ‘organisational commitment’ and ‘organisational citizenship behaviour’ (OCB) (Robinson et al., 2004). Thus Robinson et al., (2004) defined engagement as ‘one step up from commitment’. As a result, employee engagement has the appearance of being yet another trend, or what some might call “old wine in a new bottle”. Employee engagement, also called worker engagement, is a business management concept. An "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests. According to Scarlett Surveys (scarlett survey.com,2001) , "Employee Engagement is a measurable degree of an employee's positive or negative emotional attachment to their job, colleagues and organization that profoundly influences their willingness to learn and perform at work". Thus engagement is distinctively different from employee satisfaction, motivation and organisational culture. Employee engagement was described in the academic literature by Schmidt et al., (1993). A modernised version of job satisfaction, Schmidt's influential definition of engagement was "an employee's involvement with, commitment to, and satisfaction with work. Employee engagement is a part of employee retention." This integrates the classic constructs of job satisfaction (Smith et al., 1969), and organizational commitment (Meyer and Allen, 1991). Harter and Schmidt's (2003) most recent meta-analysis can be useful for understanding the impact of engagement. Linkage research received significant attention in the business community because of correlations between employee engagement and desirable business outcomes such as retention of talent, customer service, individual performance, team performance, business unit productivity, and even enterprise-level financial performance ( Rucci et al.,1998). Some of this work has been published in a diversity context (McKay, Avery, Morris, 2008). Employee engagement is a workplace approach designed to ensure that employees are committed to their organisation’s goals and values, motivated to contribute to organisational success, and at the same time are able to enhance their own sense of well-being. There are differences between attitude, behaviour and outcomes in terms of engagement. An employee might feel pride and loyalty (attitude), be a great advocate of their company to clients, or go the extra mile to finish a piece of work (behaviour). Outcomes may include lower accident rates, higher productivity, fewer conflicts, more innovation, lower numbers leaving and reduced sickness rates. But we believe all three – attitudes, behaviours and outcomes – are part of the engagement story. There is a virtuous circle when the pre-conditions of engagement are met when these three aspects of engagement trigger and reinforce one another. Although improved performance and productivity is at the heart of engagement, it cannot be achieved by a mechanistic approach which tries to extract discretionary effort by manipulating employees’ commitment and emotions. Employees see through such attempts very quickly; they lead instead to cynicism and disillusionment. By contrast, engaged employees freely and willingly give discretionary effort, not as an ‘add on’, but as an integral part of their daily activity at work. An engaged employee experiences a blend of job satisfaction, organisational commitment, job involvement and feelings of empowerment. It is a concept that is greater than the sum of its parts.


 

Fig No: 1.Out Comes of  Employee Engagement

 

 


There are various and conflicting definitions of employee engagement in the psychological literature. Some definitions claim that employee engagement is something that is produced by aspects in the workplace (McCashland ,1999; Miles, 2001 and Harter et al., 2003), while others assert that it is something that the individual brings to the workplace (Harter et al., 2002 and Goodard, 1999). Extraneous variables such as individual differences may not be trivial and could have significant effects (Ferguson, 2007). There is much evidence in the literature to support the notion that individual differences impact on work performance. Kahn (1990), for instance, argued that psychological differences may impact on individuals’ ability to engage or disengage in their role performance, just as they shape a person’s ability and willingness to be involved or committed at work. Accordingly, people would engage differently “given their experiences of psychological meaningfulness, safety and availability in specific situations” (Kahn 1990). For example, when people experience situations as unsafe, it is a matter of individual difference, what coping strategies they deploy, and the extent to which they engage or disengage (Portello, 1996). Moreover, it is argued that individual differences play a vital role in determining an employee’s potential level of engagement (Robinson, 2006). The process of perception is a key factor in individual behaviour. Buchanan and Huczynski (2004) define perception as “the dynamic psychological process responsible for attending to, organising and interpreting sensory data”. To a large extent, perception relates to the way in which individuals make sense of their environment and interpret and respond to the events and people around them. Equally, it is important to emphasis that each individual receives information differently. This is because individuals do not receive information about what is happening around them passively and dispassionately or in the same way as others. According to Robinson (2006) individuals categories make sense of events and situations according to their own unique and personal frame of reference, which reflects their personality, past experiences, knowledge, expectations and current needs, priorities and interests. Personality is a key influence on the process of perception. Bowditch and Buono (2001) suggest that, “our personality acts as a kind of perceptual filter or frame of reference which influences our view of the world”. Therefore, it is argued that it is our personal perception of our social and physical environment that shapes and directs how engaged an employee is, rather than some objective understanding of an external reality. So the not only the external factors determine the engagement level of employees. It has also been argued that employee engagement is related to emotional experiences and wellbeing (May et al., 2004). Despite this, studies of organisations often overlook the effects on behaviour of feelings and emotions. Emotions are a natural feature of our psychological make-up and affect not only individuals’ personal lives but also their behaviour at work. According to Lawler and Worley (2006) for a high-involvement work practice to be effective and for it to have a positive impact on employee engagement, employees must be given power. They argue this will lead to employees having the ability to make decisions that are important to their performance and to the quality of their working lives, thus engaging them in their work. Furthermore, Lawler and Worley (2006) contend that power can mean a relatively low level of influence, as in providing input into decisions made by others or it can mean having final authority and accountability for decisions and their outcomes. Involvement is maximized when the highest possible level of power is pushed down to the employees that have to carry out the decision, resulting in gaining the maximum level of engagement possible from employees. According to Buckingham (2001) such employees were “intent on sharing with colleagues the many reasons for which they believe their organisation is such a rotten place to work”. The study also found that the longer employees remained with an organisation, the more disengaged they became. Similarly, researchers at Gallup (Brim ,2002) and Truss et al., (2006) identified an inverse relationship between employee engagement, or the degree to which a worker is fulfilled by his or her job, and the length of service. According to Brim (2002) such evidence indicates that for most employees, the first year on the job is their best and thereafter it is ‘downhill’. One challenge for employers is to find ways of renewing employees’ engagement levels through the duration of their employment. This finding was surprising. Gallup researchers expected to find an increasing sense of belonging over time with new hires expected to be tentative. Clearly, the inverse relationship between engagement and length of service suggests a disconnection between how organisations intend to treat their workers and how workers feel about their jobs. Brim (2002) argues instead of making the most of the strengths of employees, organisations continually remind employees of their shortcomings through training programmes that focus on fixing an employee’s weaknesses, which in turn can lead to a disengaged workforce. The employees are engaged in different levels in an organization. The organization that believe in increasing employee engagement levels concentrate on these different engagement levels.  The first engagement level consists of Culture. It consists of a foundation of leadership, vision, values, effective communication, a strategic plan and HR policies that are focused on the employee. This also creates a morality among employees.The second one is  Commitment, It is the basic foundation of engagement. Employees with high level of organisational commitment are willing to exert considerable effort for the organisation and make discretionary contributions. These creates better productivity in organizations.The third level  Cooperation  encompasses positive relationship among employees within a group. This is the inherent willingness of individuals working in a team to pull in the same direction and achieve organisational goals. Cooperative mind create a good team spirit also.The next level is taking responsibility.It is the Willingness to take initiative and responsibility become a part of the solutions of better engagement. For an employee to display loyalty towards his organisation, the first thing he needs to do is to take responsibility. “Taking responsibility” refer to feeling empowered. Employees who feel empowered have a sense of belonging and excitement about their jobs, they feel engaged at an emotional level and are willing to give their best all the time.

 


 

Fig No: 2 Engagement Level

 


 

2.1 Factors related to employee engagement

Different researches are being conducted around the world for finding out different factors influencing employee engagement. Wilson (2004) argues that “feelings connect us with our realities and provide internal feedback on how we are doing, what we want and what we might do next. Being in organisations involves us in worry, envy, hurt, sadness, boredom, excitement and other emotions. Robinson et al., (2004) identified key behaviors, which were found to be associated with employee engagement. The behaviors included belief in the organisation, desire to work to make things better, understanding of the business context and the ‘bigger picture’, being respectful of and helpful to colleagues, willingness to ‘go the extra mile’ and keeping up to date with developments in the field. The employee behavior is the basic factor determining whether need to engage or not. Then on the other side, the organizational factors are also related to engagement. So Employee engagement was closely linked to feelings and perceptions around being valued and involved, and that the key drivers of engagement included effective leadership, two-way communication, high levels of internal co-operation, a focus on employee development, a commitment to employee wellbeing and clear, accessible human resources policies and practices to which managers at all levels were committed. Research has consistently shown that employee engagement is powerfully linked to a range of business success factors such as Employee performance/efficiency (Harter, Schmidt and Hayes,(2002), Socio cultural factors (Schein, 1970, 1987),  Productivity (Maslach, Schaufeli and Leiter, (2001) ,Safety (Kahn,  (1990), Attendance and retention (Holbeche and Springett,(2003), Leadership (Salanova, Agut and Peiro, (2005) ,Customer service and satisfaction (Roberts, and Davenport, (2002) , Customer loyalty and retention (Gonrig, (2008) ,Profitability (Seijts and Crim,(2006),.


 

Fig No: 3 Organisation Factors relate to employee engagement

 

 


While employee engagement is “the key to building a sustainable high performance organization’, according to Macey and Schneider (2008) it is the organization’s responsibility to Create conditions that truly engage the workforce. Several factors, operating simultaneously and in interaction with one another, determine whether a given worker in the organization will be engaged or not. Individual differences have been found to play a role in the level of engagement. Again, socio cultural factors, such the community to which one belongs (Schein, 1970, 1987), and satisfaction with the organization mediates one’s level of engagement. Organizational features play a major role in determining how engaged will a given worker feel in the workplace. In this context, Salanova, Agut and Peiro, (2005) identified predisposing factors such as Organizational level treatment, social comparison, leadership influence, and social influence. Two major determinants of employee engagement are ‘Care and Recognition’, which are, primarily a function of Manager’s leadership practice and style. This shows that manager’s leadership style is also influencing engagement. Recognition typically consists of acknowledgement given for the good work done, whereas Care represents an emotional bonding that makes an employee feel valued and have a sense of belongingness to the ‘family’ (Gilson and Harter, 2004). It is seen that when supervisors behave positively to employees and show regards, employees feel obliged to reciprocate that exchange – leading to a mutually beneficial interaction (Wayne and Green,1993). Studies show that relationships with managers were the biggest influences on the satisfaction and commitment of employees, followed by the relationships with colleagues (IRS, 2004). The behavior and personal engagement of line managers has a direct influence on the engagement levels of the immediate subordinates (DDI, 2005). Managers create an environment that maximize the performance of employees and provide employees with a passion to work (Baumruk, Gorman, Gorman and Ingham, 2006; Lockwood, 2006), thereby influencing the level of employee engagement of the employees. Opportunities for growth also enhance the level of engagement of the employees. Here arises the importance of promotion policy in an organization. Employees tend to stay with organizations, which are “talent friendly” and progressive (Towers, 2006). According to Seijts and Crim (2006), ten C’s are influencing employee engagement:


 

Fig no: 4  Ten C’s influencing employee engagement

 

 


3. EFFECT OF EMPLOYEE ENGAGEMENT ON PERFORMANCE:

A recent SHRM ( Society for Human Resource Management) new global employee engagement study in 2006 surveyed 664,000 employees from around the world and found almost a 52% gap in the yearly performance improvement in operating income between organizations with highly engaged employees and organizations having employees with low engagement scores. Again, a recent meta analysis of over 7939 business units in 38 companies revealed the relationship between employee satisfaction engagement and the business unit outcomes of customer satisfaction, profit, productivity, employee turnover and accidents (Nowack, 2006). Employee engagement has been linked to superior performance and higher levels of organizational commitment by a number of researchers (Woodruffe, 2006; Lockwood, 2006). Engaged employees leads to engaged customers, and this, in turn converts into long term profitability. Luthans and Peterson (2002) state that Gallup has empirically determined employee engagement be a significant predictor of desirable organizational outcomes, such as customer satisfaction, retention, productivity and profitability. It was found that employees scoring high on engagement (top 25%) performed better in the areas of sales, customer complaints and turnover in comparison to the employees scoring low on engagement score (bottom 25%) (The Gallup


Organization, 2004).The Corporate Leadership Council (CLC) survey revealed that employee engagement leads to 57% improvement in discretionary efforts (Corporate Leadership Council, 2004). The CLC contends that emotional engagement has four times the power to affect performance as compared to rational commitment. The employers attempt to convert as many employees to true believers as they can (Buchanan, 2004). Low engagement among employees translates in economic loss for the organization. Gallup estimates that in the United Kingdom, unengaged workers cost their companies $64.8billion a year. In Japan, where only 9% of the workforce is engaged, the lost productivity amounts to billion dollars (The Gallup Organization, 2004). Engaged employees within an organization provide a competitive advantage to organizations (Joo and Mclean, 2006). Employee engagement has a substantial impact on employee productivity and talent retention (Lado and Wilson, 1994). Martel (2003) is of the opinion that, “in order to obtain high performance in postindustrial, intangible work that demands innovation, flexibility, and speed, employers need to engage their employees. Engaging employees – especially by giving them participation, freedom, and trust – is the most comprehensive response to the ascendant postindustrial values of self-realization and self-actualization”. Employee engagement has also been found to bring benefits at the individual level. So the benefit is two way in nature. A research was done by Britt, Adler and Bartone (2001), found that engagement in meaningful work can yield benefit from work. In a recent study it is explored that over the past 6 years, where the level of engagement had increased, absenteeism had decreased among employees (The Gallup Organization, 2004). This shows employee engagement as one of the factor influencing absenteeism in an Organisation. In a comprehensive review of literature on employee engagement, Stairs et al., (2006) pointed out that employee engagement has also been linked with higher employee retention (DDI, 2005; Harter, Schmidt and Keyes, 2003.), greater employee effort and productivity (Corporate Leadership Council, 2004), increased sales (Hay Group, 2001), greater income and turnover (Maitland, 2005; ISR, 2006; Harter et al.2003), greater profitability (Harter et al.,2003), and faster business growth and higher likelihood of business success (Hewitt Associates, 2004).

 

4. TRENDS IN EMPLOYEE ENGAGEMENT:

The global recession (Modest Growth Pickup in 2013, 2013) has certainly taken its toll on employees. The situation leads to a tensed state among the employees. Pay freezes, benefit cuts and layoffs are still at the forefront of many employees’ thinking. Additionally, the continued high rates of unemployment, lack of hiring, and extended hiring cycles for open positions (an average of 23 business days today compared to a low of 15 in mid-2009) create further stress and uncertainty for employees, making it more difficult to achieve or maintain healthy levels of engagement. As markets around the world continue to display uneven growth patterns following the global recession, predictions for 2013 are marginally optimistic but varied by region. The International Monetary Fund (IMF) predicts stronger global growth , driven by growth in China, India and Brazil, and greater confidence in U.S. growth following the recent election. But now the situation of U.S is not favourable but expecting a fast recovery. The Euro Zone predicts continued variability, with minimal expansion in Germany and France, while countries such as Italy and Spain continue to resolve their country-specific challenges from the global economic crisis.  The economic recession (www.haygroup.com/insight)  that began in 2008 still looms over businesses across the globe. The complex landscape of human capital challenges mixed with financial constraints forced organizations to make tough decisions on where to invest their people, time and resources. These management decisions have impacted employee engagement levels and perceptions globally. In 2012, the global engagement score was 60%, up 2 percentage points from 58% in 2011. While on the surface this looks like a modest improvement across the board, a look below the surface reveals that engagement levels fluctuate sometimes substantially around the world. Based on a five-year longitudinal analysis, we see these engagement levels range globally from 72% and above for companies in the top quartile to 46% and below for companies in the bottom quartile. Engagement level by region varies. Continued  improvements in engagement scores in Europe were the strongest among all four regions (up 5 percentage points, from 52% to 57%), followed by Latin America (up 3 percentage points, from 71% to 74%), contributing to the overall upward movement of global engagement. North America declined 1% (with the U.S. declining 3% between 2011 and 2012) and Asia Pacific experienced no change. Despite some modest rises in employee engagement and enablement, two-fifths of the global workforce still intends to change employers within five years. Another recent study by Hay Group, in partnership with the Centre for Economics and Business Research, revealed that workers around the world are already starting to seek new job opportunities, as economic growth begins to return and labor markets begin to pick up. In 2018, it is predicted that 49 million more employees will be heading out the door compared to 2012 – a total of 192 million employees worldwide. The global employee turnover rate will see the sharpest increase in 2014. But regional economic and job market forecasts show that turnover will spike at different times in different geographies. Emerging economies in Asia and Latin America will spike between now and future, while mature markets will peak between 2014 and 2018, led by dominant economies such as Germany and the U.S. Organizations therefore must start thinking now about how to secure the long-term commitment of their workers. Failure to create the right working environments will encourage disgruntled employees to take off in search of better conditions.


 

 


Top 3 contribution drivers by region

 

North America

Europe

China

India

GCC

Australia/NZ

South America

1

 More resources

 More resources

Regular, specific feed­back about how I’m doing

 Greater clarity about what the organization needs me to do – and why

Development oppor­tunities and training

 Development oppor­tunities and training

 Development oppor­tunities and training

2

Greater clarity about what the organization needs me to do – and why

A coach or a mentor other than my manager

 Development oppor­tunities and training

 Regular, specific feed­back about how I’m doing

Greater clarity about what the organization needs me to do – and why

 More resources

 Regular, specific feed­back about how I’m doing

3

A coach or a mentor other than my manager

Regular/specific feedback about how I’m doing

 Greater clarity about what the organization needs me to do – and why

Development oppor­tunities and training

Regular, specific feed­back about how I’m doing

 Regular, specific feed­back about how I’m doing

 Greater clarity about what the organization needs me to do – and why

Source: (Employee Engagement Research Update 01/13 rev2, www.blessingwhite.com/research.)

 

 


5. CONCLUSION:

The world unequivocally agrees that this century demands more efficiency and productivity than any other times in history. Businesses are striving to increase their performance and productivity. The organisations have been grappling with many challenges to succeed putting their company ahead of competitors. For controlling and managing the changing situation, different scholars, researchers and consultants have been contributing their part through suggesting best ways to think. Historically these situation leads to evolution of modern management concepts. Each seconds of valuable business movements digging for a technique for attaining the above said goals  In among those suggested techniques, concepts like Total Quality Management  and Business Process Reengineering earned recognition from many authors in the second half of twentieth century and were found helpful in increasing organizational performance by focusing on operational and process improvements. They were still being used as tools for management in their effort to plan, execute and control of the desired changes in the operational quality. Concentrating on employee engagement can help companies withstand, and possibly even thrive, in tough economic times. Philosophically an unengaged mind is devils house. According to Indian philosophical concept the workers need to engage in every action without thinking about the fruit of action. So when taking concept if it is western or eastern the engagement level is high the result will also be high.

 

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Received on 20.02.2014               Modified on 22.03.2014

Accepted on 12.04.2014                © A&V Publication all right reserved

Asian J. Management 5(4): Oct.- Dec., 2014 page 365-373