HR Management Assignment help on: Employee Engagement

Introduction

This literature review aims to examine and evaluate the existing literature which relates to the relationship between employee engagement and organisational performance. Initially the literature review will focus on defining the term ‘employee engagement’ by examining existing literature that has attempted to define this area. The next stage in the literature review will be to examine the existing research which has aimed to identify a link between employee engagement and organisational performance. As this review will show, there is no single definition of employee engagement, there is a lack of agreement in the academic and commercial world as to what is meant by employee engagement. However, there are common themes in the definitions and these will be used as the basis for selecting the literature to be reviewed, as well as looking at literature that focuses on some of the specific aspects that make up the definition of employee engagement. Organisational performance is a subjective term in that some organisations measure performance based on monetary returns or savings, whereas others may have other criteria such as customer satisfaction and loyalty. This literature review will examine research that has used different performance indicators.

Finally, limitations in the existing literature will be discussed before coming to a conclusion.

 Definition of Employee Engagement

Before discussing the relationship between employee engagement and organisational performance, it is necessary to discuss the meaning of the term ‘employee engagement’.

Kahn (1990, p.694) 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 performance.” Therefore, employee engagement has both physical and psychological aspects to it. The physical aspect involves employees exerting themselves, making effort to use their energy in performing roles for the organisation. The psychology of employee engagement relates to how they perceive the company and how they feel about the organisation, their leaders and working conditions, whether they have positive or negative attitudes towards these three areas (Kular, Gatenby, Rees, Soane and Truss, 2008).

Schaufeli, Salanova, González-Romá and Bakker (2002, p.72) define employee engagement as “positive,fulfilling, work-related state of mind that is characterized byvigor, dedication, and absorption”. The authors explain the definition further, vigour relates to employees’ readiness to maintain high levels of effort in their work and to be resilient when challenges arise. Dedication is characterised by an employees’ sense of pride and enthusiasm for their work and absorption relates to being engrossed in one’s work, not noticing time going by due to the high level of concentration. Csikzentmihalyi (1975) discussed this aspect of employee engagement, it is commonly known as ‘flow’. It is where an employee is totally involved (absorbed) in their work, to the point where they are not conscious of theeffort involved in the tasks that they are performing while they perform them to a high level of competence. They are working because they enjoy the challenge and are motivated by it.

Zigrami, Nimon, Houson, Witt and Diehl (2009) discussed how commercial research and academic research was not in agreement on a definition of employee engagement. Broadly, the differences highlighted are that the academic community focused on job commitment and job involvement, rather than organisational commitment, which the commercial researchers were focused on. Zigrami et al. (2009) examined studies that were published in EBSCO between 2000 and 2008 which related to engagement and came up with four common themes that help to define engagement:

1. Engagement is not directly related to job commitment or organisational commitment, it is more to do with positive work psychology.
2. Job involvement is a key aspect of engagement and this relates to a sense of well-being and meaningfulness.
3. Definitions of engagement overlap with ideas that previously existed, such as job commitment and job involvement, therefore it has little merit as a construct in itself.
4. Due to the fact that involves previously existing ideas it can be useful for predicting work behaviour, as a “megaconstruct” (p.306).

Saks (2006) argues that there is a distinction between employee engagement and organisational commitment, the difference lies in that while engagement does relate to organisational commitment on one level, it goes beyond this, there is also the total involvement that employees display in the performance of their role.

Bakker and Schaufeli (2008) identified three approaches to employee engagement; motivating resources such as support from managers, performance feedback and opportunities for learning and development. They describe the lack of a common definition for employee engagement and the attempts to reframe previously recognised constructs as employee engagement as “putting old commitment wine in new engagement bottles” (p. 151). Due to the lack of a single agreed upon definition, it is difficult to examine all research that relates to it, as it may come under different names, depending on the viewpoint of those carrying out the research. However, the common themes that run through definitions of employee engagement are clear, it involves commitment at an organisational level and an individual job level, it relates to job involvement and there are psychological aspects, including perceptions and positive emotions that lead to employees engaging within their organisation.

Employee Engagement and Organisational Performance

It has been acknowledged that employee engagement has positive consequences (Saks, 2006). Research by Harter, Schmidt and Hayes (2002) found a positive relationship between employee engagement and positive outcomes for business, which included customer satisfaction, productivity, profit, employee turnover, and accidents:  “We conclude from this study that employee satisfaction andengagement are related to meaningful business outcomes at amagnitude that is important to many organizations and that thesecorrelations generalize across companies” (p. 276).

Similarly, Harter, Schmidt, Killham and Agrawal (2009) state that “the relationship between engagement and performance at the business/work unit level is substantial and highly generalizable across organizations” (p. 3).By carrying out a meta-analysis a link could be found between engagement and positive business outcomes.

Further to this, Ott (2007) found a positive correlation between employee engagement and earnings per share of publicly traded business. It was found that organisations with a ratio of four engaged employees to one disengaged employee had an earnings per share growth that was 2.6 times greater than organisations that had a ratio of slightly less than one engaged employee for every actively disengaged employee. In addition to this, it was found that organisations who were in the top quartile with regards to employee engagement were performing 18% better on earnings per share measurement than their competitors during the period that was studied. Evidence was found that it was not only inter-company performance that was better as a result of employee engagement, intra-company performance was also better, that is groups within companies who were highly engaged were out-performing groups within the same company who had lower engagement levels. Performance was measured with regards to customer advocacy, productivity and profitability, more engaged organisations performed better in each of these categories than organisations with lower engagement. Whereas, companies with lower engagement had higher rates of inventory shrinkage, employee turnover and accidents occurring.

Gopal (2006) has looked at employee engagement from another point of view, the consequences of employee disengagement, with a focus on Singapore. A decline in employee engagement was seen in Singapore, with an increase in active disengagement that cost the economy of Singapore an estimated $6 billion due to loss of productivity. This massive loss of potential income due to poor engagement practices needs to be addressed in all companies that operate in Singapore, according to the author.

MacLeod and Clarke (2009) highlight some of the research that has been carried in relation to employee engagement and organisational performance and summarise results from several reports. For example, TowersPerrin-ISR (2006, in McLeod and Clarke, 2009) which found that organisations with highly engaged workforces improved operating income by 19.2 per cent over twelve months. It also found that those with high engagement saw net income growth of over thirteen percent, while those with low engagement saw their net income growth decline by nearly 4 per cent. Another study which the authors reported on, is that of the Corporate Leadership Council (2008, in McLeod and Clarke, 2009) which stated that organisations that were engaged increased profits three times faster than their competitors. In addition to this, the Corporate Leadership Council’s report found that organisations that were highly engaged could reduce employee turnover by 87 per cent and also improve their performance by 20 per cent.

On a more individual level Tsai, Chen and Liu (2007) reported that a positive mood, an emotional aspect of employee engagement, was an indicator of task performance. This was as a result of better interpersonal performance and also higher motivation, employees helped co-workers more and were more persistent in tasks due to their positive mood. A limitation of this report, which the authors are aware of is that task performance was measured subjectively, rather than objectively, supervisors were asked to rate the employees’ task performance. Another limitation is that the sample was taken solely from Taiwan, unlike in the Harter et al. (2002) and Harter et al. (2009) meta-analyses, therefore the results may not have cross-cultural validity.

Salanova, Agut and Peiró (2005) looked at performance measurement from another point of view, rather than looking at profits or earnings per share, the research looked at the effects of employee engagement on customer satisfaction and loyalty. While this study was largely based on service climate, rather than directly on employee engagement, employee engagement is a factor in the service climate, therefore it is beneficial to examine the results. What was found is that when there is a positive service climate, the type of climate that employee engagement produces, there is an increase in customer loyalty.

Employee engagement reduces staff turnover, as has been mentioned above, Gelade and Ivery (2003) reported that staff retention had a strong correlation with customer satisfaction. This shows an indirect link between employee engagement and customer satisfaction. The reason for the increased satisfaction, as stated by the authors, is that if there are high levels of staff turnover then customers are more likely to encounter inexperienced staff, who may be less efficient or competent due to their lack of experience. It is reported by George and Ivery (2003) that a favourable psychological environment, as is fostered by employee engagement, is associated with better organisational performance.

As well as improving performance, employee engagement can also reduce costs, as stated by Lockwood (2007) in an example given where MolsonCoors could identify that highly engaged employees saved them over $1.7 million per year by avoiding safety incidents.

Most of the studies that have been mentioned above involve large organisations, MacLeod and Clarke (2009) identified the fact that there is a lack of research relating to small and medium sized organisations, the general belief is that there will be more engagement in these organisations automatically due to their nature. However, this is not the case according to the research (MacLeod and Clarke, 2009), highlighting the drop in employee advocacy.

However, the main limitation in the research is the lack of a common definition for employee engagement, as discussed in the previous section. Without a common definition analysis is being carried out on various aspects of employee engagement, with common themes but no single definition. This means that a lot of the studies relating to this topic are either too specific in that they only look at one aspect of engagement, for example the work of Tsai, Chen and Liu (2007), or some are too general and take a single viewpoint of engagement, either with an individual focus or organisational commitment focus, for example Salanova, Agut and Peiró(2005) look at engagement from an individual’s perspective.

 Conclusion

This literature review has set out to identify a definition for the term ‘employee engagement’ and to examine the existing literature relating to employee engagement’s relationship with organisational performance.

A commonly agreed upon definition of employee engagement is not available, the academic world and the commercial world both look at it from different perspectives. The commercial world defines it from the perspective of the employee’s commitment to the organisation, whereas the academic literature largely bases definitions on the perspective of the individual and how the individual perceives his role and support within the company.

Despite some the divergent nature of the definitions available, there are common themes that can be found. Commitment at both a job level and organisational level is often mentioned in the literature, as is employee satisfaction. The literature examined above, explains how these themes, among other aspects, relate to organisational performance.

Organisational performance is measured in various ways within the literature, for example in terms of earnings per share (Ott, 2007), operating income and net profit (MacLeod and Clarke, 2009), task performance (Tsai, Chen and Liu, 2007), customer satisfaction and loyalty (Salanova, Agut and Peiró, 2005) and cost reduction (Lockwood, 2007).

The research has overwhelmingly shown a positive relationship between employee engagement and organisational performance. Strengthening this, is that the literature has also shown the relationship to work both ways, in that disengagement can lead to potential losses (Gopal, 2006). However, there are limitations to the research that hinder its value. On a general level, the lack of a unified definition of the term ‘employee engagement’ means that research in this area cannot be directly compared, therefore it can be directly validated or invalidated. The fact that the literature has shown employee engagement, in its various forms, to be consistently positively related to organisational performance would suggest that there is a consensus and therefore the research is validated. However, by having the definition so fragmented it removes the ability of researchers to disprove the consensus, if one aspect of it is disproven there are still the other aspects for researchers to point to.

Despite the limitations outlined, it is clear from the literature that has been reviewed that there is a positive relationship between employee engagement and organisational performance.

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