The role of employee engagement

in the delivery of enhanced

organizational performance and

the implications for managerial

behaviour

David Schofield

Date – 11/01/2012

AbstractThe author begins by explaining how organisations have reached their present point of view; seeing human capital as their most important source of competitive advantage over financial and technological capital, as previously believed. The relationship between High Performance Working (HPW) practices and Employee Engagement (EE) is discussed, both of which are shown to produce higher performance, usually in tandem with one another. However it is shown that without effective people management, neither of these can be expected to be maintained in the long-term. It is finally summarised that HPW has been shown to increase performance. HPW practices have been shown to do this through achieving an engaged workforce (measurable through the level of Discretionary Behaviour (DB) exhibited by employees). The drivers for EE are employee commitment, motivation and job satisfaction, which if managed well with good people management (by front-line managers) and good HPW practices, will create a positive feedback-loop between them and DB, and thus high performance and outcomes.

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ContentsAbstract.................................................................................................................................................1

Introduction...........................................................................................................................................5

Getting to this point...............................................................................................................................7

Linkages between high performance and Employee Engagement........................................................9

High Performance Working (HPW)....................................................................................................9

Employee Engagement (EE).............................................................................................................10

Implications for managerial/leadership practice in achieving an engaged workforce.........................13

Culture.............................................................................................................................................14

Conclusions..........................................................................................................................................15

References...........................................................................................................................................17

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IntroductionThroughout this academic paper, the author will critically examine the role of Employee Engagement (EE) in the delivery of enhanced organizational performance and the implications for managerial behaviour. This will be done by identifying the links between EE, High Performance Working (HPW) Practices and the Role of Managers/Leaders in achieving an engaged workforce. This will necessitate the demonstration of a critical understanding of theories, models and frameworks relevant to organizational performance and EE, by reference to the appropriate literature. The author will identify practical examples from organizations which illustrate the linkages between EE and performance and evaluate the impact of managers’ behaviour in relation to producing a culture of engagement and HPW.

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Getting to this pointUntil the 1980s there had been a belief that financial and technological capital was the main source of competitive advantage for organisations, but this view is now becoming more people-centred. In the days of the cold mechanistic views of the classical theorists ( (Taylor, 1911), (Gilbreth, 1912), (Gantt, 1910), (Fayol, 1917), (Weber, 1927), (Smith, 1904) ), people were viewed as costs (instead of assets). However as time went on, organisations started to realise that how people were treated (inter-personally and with resource incentives) and felt, directly affected their performance ( (Mayo,1933), (Peter & Waterman, 1982), (Barnard C. , 1971), (Maslow, 1954), (Herzberg, 1959), (Vroom,1983)). Human Resource Management (HRM) came about in this time. Until the 1980-90s, organisations saw no link between Business Strategy and HR Strategy (see Separation Model – (Torrington et al. 2005)), viewing business strategy as something that was dictated to the organisation’s employees by the “dominant coalition” (Thompson, 1967). However, Mintzberg (1994) argued that strategy (business or otherwise) emerges from the day-to-day happenings within an organisation (usual as a result of people), and therefore any ‘intended’ strategy would change . From here, various other models and theories were developed to describe the relationship between business strategy and HR strategy, and more specifically developing HR strategy ((Torrington et al. 2005), (Schuler & Jackson, 1987), (Miles & Snow, 1984), (Fombrun et al. 1984), (Hendry & Pettigrew,1992), (Guest, 1997), (Storey, 1992)), with Beer et al (1984) recognising that there are various stakeholders (internal e.g. employees and external e.g. suppliers) of importance (influence) in the strategic planning process. Relationship Marketing (Berry, 1983) is something that arose from these views. Recognising the various levels of influence led to the Resource-Based model, which acknowledges the relationships between internal resources. Prior to the previously held belief that financial and technological capital was the main source of competitive advantage; within HRM, the resource based model described how developing Human Capital (rather than aligning HR and business strategy as previous models had) leads to sustained competitive advantage. Human capital comprises of the knowledge, skills and abilities of the people within an organisation; it is “concerned with the added value people provide for organisations” (Baron & M, 2007, p. 5). Further competitive advantage can be gained by focusing on Organisational Learning and Knowledge Management (KM) (Grant, 1991). KM has become increasingly popular, with a view of employees as knowledge workers, the rise of knowledge cities ( (Chatzkel, 2004), (Wong et al. 2006), (Chen & Choi, 2004), (Dvir & Pasher, 2004), (Edvinsson & Leif, 2006), (Ergazakis et al. 2004), (Ergazakis et al. 2006), (Garcia, 2004), (Baqir & Kathawala, 2004), (Ovalle et al. 2004)) and the global knowledge economy (Lang, 2001), (Murray & Greenes, 2007)). For UK manufacturing (in particular, but not confined to) to succeed in the global economy, it is critical that productivity is boosted (EEF; CIPD, 2003), and a key aspect of HRM – High Performance Working – can be used to do this.

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Linkages between high performance and Employee EngagementHigh Performance Working (HPW)Understanding the mechanisms by which HRM effects performance has been a mystery in the literature (Delery, 1998), and as such has been labelled the “Black Box” (Boselie 2005). One way of unlocking the black box has been through the introduction of HPW practices. EEF and the CIPD admit that there is no universal definition for HPW, but for their own research describe all HR practices that lead to greater performance as HPW practices (EEF; CIPD, 2003). The key characteristics of HPW as set out by Patterson et al (1997) include: appropriate selection and recruitment processes, sophisticated and wide coverage of training, coherent performance management systems, job variety and responsibility, team working, frequency and comprehensive communication to employees, use of rewards related to individual and/or group performance and policies to achieve an appropriate work-life balance, to name a few – a list which is similarly given in Purcell’s People-Performance Model (2003) and also by Guest (2000). These HPW practices are then explained to improve company performance through increasing employee’s abilities and skills, promoting positive attitudes/increasing motivation and increasing employee responsibilities. Similarly described by the CIPD’s AMO Model – Ability and skills, Motivation and incentive, Opportunity to participate (CIPD, 2002). The AMO model is also used as part of Purcell’s Model (2003), which aims to show how EE leads to greater performance. This author therefore believes, that given the multiple similarities between literature relating to HPW and EE, that there is a clear link between the two areas. More specifically, that HPW drives EE, which therefore produces high performance. It seems that HPW and EE come hand in hand, however there are incidences where this is not the case, as discussed later in the paper.

Gratton (1996) shows that organisations have a tendency to focus on short-termism and as such fail to succeed in the long term. People act in accordance with what they are praised and rewarded for, so it is important that they are rewarded for things that improve long-term company performance. If employees are rewarded for producing short-term financial gains and are punished for taking a bit of extra time getting to know the customer for long-term gains, companies may fail to have longevity. Reward systems are therefore important when designing HPW practices.

Looking at the People-Performance Model (Purcell et al. 2003) more in-depth; there are various (which I will dub as) HPW practices that feed into the AMO Model (CIPD, 2002) (and thus drive EE). These include recruitment/selection of appropriate people (CIPD, 2008). By “appropriate”, it is meant that people whose personal goals fit with the organisation’s goals. A seemingly popular way to ensure that appropriate people are sought is through employee referral schemes ( (SimplifiedRecruitment, 2009) and (Alder, 2010), as shown in the case study of ConstructionCo (CIPD, 2008) and experienced first-hand during this author’s time working for the AA Driving School. One source claims these account for about 30% of new recruitment (Hakala, 2008). Prospective employees are already vetted by current employees – reducing required recruitment resources. New staff will also likely settle in quicker and stay longer as they already have acquaintances within the organisation ( (National Archives, 2008) and (Smart Hire, 2010)). However, diversity within the workforce may be reduced, stifling new ideas and possibly conflicting with equal opportunities legislation ( (Higgins,2007) and (National Archives, 2008)). Another key HPW practice shown in the People-Performance Model (Purcell et al. 2003) is work-life balance, which – whilst out of balance – was shown to cause

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under-engagement with at ConstructionCo (CIPD, 2008). It has also been argued that over-engagement with work can lead to problems with work-life balance (McBain, 2007), which eventually leads to lower performance.

As part of a performance management system, there needs to be some recorded performance metrics. An issue found at ConstructionCo (CIPD, 2008), is that (as they’re growing quickly), they may need to start introducing more structure, in terms of defining job roles, measuring performance and introducing HPW practices. This author notes that whilst organisations must overcome a “crisis of control” in order to grow (Greiner, 1972); it is important to be mindful of the bureaucracy that may arise from this, which often leads to lower job satisfaction and thus lower EE (CIPD, 2008).

Another element of the People-Performance Model (Purcell et al. 2003) is employee involvement e.g. them being included in decision-making. This has been shown as one of the key HPW practices for improving EE in North Trust, which claims 69% of its employees rate as highly engaged (CIPD,2008).

Employee Engagement (EE)Employee Engagement also suffers from a lack of universally-accepted definition. Various attempts have been made ( (Kahn, 1990), (Baumruk, 2004), (Richman, 2006), (Shaw, 2005), (Truss et al. 2006)), however, this author will select the definition given by Frank et al. (2004), as “the amount of discretionary behaviour exhibited by employees” i.e their willingness to go the ‘extra mile’. As part of the CIPD’s AMO model (CIPD, 2002), O relates to the Opportunity to engage in discretionary behaviour; both inside the job i.e how the job can best be done, and outside as the employee is considered an organisational citizen. The CIPD (2002) claims there seems to be a strong link between job satisfaction (defined as being challenged and having autonomy) and commitment (defined as being proud to work for a firm and wishing to continue to do so) as key requirements for encouraging employee discretionary behaviour (confirmed by (Edgar & Geare, 2007)). It is now recognised that job satisfaction is a, if not the major motivation of employees ( (Sullivan, 2009), (More Than Business, 2008) and (Maslow, 1943)) and happy employees are effective employees ( (Doward, 2010), (ARA Content, 2003) and (Center for Management & Organization Effectiveness,2010)). In the worlds of the CIPD (2001, p. 11) – “…satisfaction yields greater motivation, which in turn is reflected in better performance”. This shows a clear link between EE and high performance. The CIPD described various “people practices” that feed into creating this satisfaction, which this author finds to be similar to the HPW practices described by Patterson (1997), and those shown in the People-Performance Model (2003). The author therefore believes this shows a clear relationship between HPW and EE.

It has been shown above that EE drives high performance, however in a case study on PlasticCo (CIPD, 2008), there was an example of a highly performing factory where engagement was amongst the lowest across the multi-locational company. However, this was probably due to the introduction of new machinery which automated a great deal of the work in that factory. This was unpopular with the workforce, but did improve productivity. This does not negate EE as a driver of performance, but suggests that employees are the key element (hence the name), and must be the main contributor to production if EE is to be assessed in relation to HPW. This does however show that HPW and EE are not necessarily always mutually present within organisations, or at least individual departments, although this author believes that in larger organisations there would be a

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need for EE as a driver for high performance, as there will undoubtedly be some work requiring human involvement, such as administration.

The People and Performance Model (Purcell et al. 2003) then shows (given the correct conditions – HPW practices) that a feedback loop exists between DB/high performance and commitment/motivation/job satisfaction e.g. an employee is satisfied with work, which drives better performance, which then drives higher levels of job satisfaction and so on. Similarly, the better staff perform; the better the reputation of the organisation; the higher pride and commitment of employees and so on, as shown in ConstructionCo (CIPD, 2008). However, this could also work against the organisation e.g. from this author’s own experience, feeling unsatisfied with work, can lead to lacking effort/performance, which can lead to even lower satisfaction. Other issues then come into play, such as a lack in employee confidence, potentially counteracting any improved company reputation. This is a delicate situation that requires constant attention, in order to ensure a continuing upward spiral of effort and performance, or at least some equilibrium.

When working with the People-Performance Model (Purcell et al. 2003), it is important to take a holistic view, considering all the HPW practices (and AMO) that feed into creating the positive feedback loop mentioned. It seems that a good test of the effectiveness of following such a model is by measuring discretionary behaviour. The author would like to suggest a limitation of the People-Performance Model (Purcell et al. 2003) as it does not show the linkages between the stated HPW practices. E.g. “Performance appraisal” and “Work-life balance” are not shown to have a direct linkage, however it appears that they did have such a link at ConstructionCo, which sought to address their work-life balance issues through their performance appraisal system. Whilst the results of the attempt are not known, a clear relationship is shown. However the author concedes that this may be more of a conflict between (predominantly) Western reductionist thinking and the attempt to graphically represent inherently multi-dimensional, inter-related ideas.

A further consideration must be given to the nature of the work being undertaken. In manufacturing roles, there is a drive for higher productivity and efficiency, which often involves more automation. Roles become less broadly-skilled and more repetitive, which stunts the level of job satisfaction and EE ( (CIPD, 2008), (CIPD, 2002)). However, the question needs to be asked if this is important… If the goal is higher performance, then it seems that manufacturing organisations may not need to worry about EE (or HPW practices), however there undoubtedly will be some areas within these organisations that are more people than machine-driven. Avoiding a culture of chasing increased productivity at the expense of EE must be avoided in these situations. There is an obvious importance of the need for EE with service providers. Another driver of DB could be what Social Exchange Theory (SET) calls “obliged reciprocity”, where people are good at keeping score with each other and will be more inclined to put effort into returning favours (CIPD, 2008). These types of relationship will then be built on trust and commitment, which are important in the employee-employer relationship.

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Implications for managerial/leadership practice in achieving an engaged workforceIt is of huge importance to note the implications for managers in achieving an engaged workforce. It is all well and good having HPW practices in place, but fundamental to the ability of organisations to achieve the desired higher performance is having people in place to effectively deliver them. It is how these HPW practices are delivered as much as what they are. It is the responsibility of a leader to maintain the relationship with their staff. In terms of EE and HPW practices – the relationship between employee and line manager is very important to drive a willingness to perform i.e staff are more likely to perform well if working for someone they like and respect (CIPD, 2009). The Psychological Contract (PC) plays an important role here. It is claimed that PC theory originated from Social Exchange Theory (SET) (Nikina, 2010). The term was first coined by Agyris (1960); describing the expectations of the employee and employer of their employment relationship, beyond any contractual obligations. Trust between employer and employee has been mentioned variously throughout the literature ( (CIPD, 2008), (Robinson, 1996, p. 4), (Robinson & Rousseau,1994), (Tomlinson, 2010)). When an employee feels their expectations have been broken (trust violated) by their employer, they can become less committed to the organisation, their job satisfaction decreases, leading to decreased DB and thus their performance can also drop ( (Rousseau, 1995), (Guest & Conway, 1997), (Coyle-Shapiro & Kessler, 2000, p. 7)). However, these drops are not always necessary. Robinson ( (Robinson, 1996, p. 4), (Robinson & Rousseau, 1994)) shows that the previously stated negative effects of a breach of psychological contract can be reduced by e.g. a high level of trust between employee and employer and the reasons for the breach being well communicated. The CIPD (2002) states that this is down to employees being “realists”, and will hopefully understand and forgive the need for such a breach. The same CIPD report goes on to say that how the breach is managed is more important than what the breach is.

The Black Box Model developed by at Bath University (Purcell et al. 2003), builds on the Psychological Contract; emphasising how line-managers can set the conditions for encouraging EE. The CIPD (2002) explains one of these conditions as the translation of company goals into individual action and behaviour, which will increase commitment as employees resonate with the aims of their organisation more. A barrier to EE is that leaders may not have decided on a clear leadership style (CIPD, 2008), it is therefore important (and their responsibility) to set the tone for their relationship with their employees.

As it has been shown, an important element in ensuring EE and HPWP is to have a committed work force. This drive for commitment is not only the responsibility of line managers, but should be directed towards them also, through training and development, career expectations and support form senior management (CIPD, 2002). The CIPD (2002) shows that the ability to manage people effectively is by its nature discretionary, and therefore managers needs to be afforded the opportunity to engage in it. Managers often complain that they don’t have the required time to manage their people or the associated skills are not rewarded (CIPD, 2002).

It has been noted in research ( (CIPD, 2002), (CIPD, 2008)) that a key barrier to EE is the low perception of visibility of senior management i.e. if the senior management seem to be distant from their employees, which was the case in the case study of ConstructionCo (CIPD, 2008).

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CultureIn the 1970s and 80s the idea of organisational culture started to surface – recognised as the collective knowledge of all people within the organisation (Weick, 2005). Human Capital as an element of organisational culture is what differentiates organisations from one another (Chatzkel,2004), as people within them develop shared conceptual meanings and go about their operational duties using symbols uniquely understood by them ((Saussure, 2009), (Burrell & Morgan, 1979)). It is important therefore that the shared beliefs are positive, if they are to drive positive outcomes. This is something that can be made or broken by an effective leader. A PlasticCo plant manager admitted that “sometimes we forget the people side of things” (p. 9). The danger with this is that this management attitude may spill over into less automated areas where EE is important, creating a culture of low EE. This can be avoided (and a culture of engagement and high performance sought) by having good font-line managers; the tasks of whom, the People-Performance Model (Purcell et al. 2003) describes as implementing, enacting, leading and controlling. These feed back into the HPW practices and also into building employee organisation commitment, motivation and job satisfaction, which in turn feed into DB and performance/outcomes, creating the feedback loop previously described. This author therefore sees the leader as central to the effectiveness of HPW practices in creating a culture of EE and high performance.

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ConclusionsThe author believes that the role of Employee Engagement (EE) in the delivery of enhanced organizational performance and the implications for managerial behaviour has been thoroughly discussed and the links between EE, High Performance Working (HPW) Practices and the Role of Managers/Leaders in achieving an engaged workforce shown. Theories, models and frameworks relevant to organizational performance and EE have been used as well as practical examples from organisations which illustrate the linkages between EE and performance. Finally an evaluation of the impact of managers’ behaviour in relation to producing a culture of engagement and HPW is shown.

Ensuring commitment and job satisfaction appears to be a highly important element in driving EE, through the relationship held with the immediate line manager; requiring trust. EE, as its name suggests involves employees and has been shown to drive high performance. However high performance can be achieved without engagement in workforces that rely heavily on mechanical automation. The danger (especially for organisations that have varying degrees of automation across many departments) is that a culture of ignoring the people issues develops and then less automated departments suffer as a result.

Bridging the gap between employee goals and organisational goals is a good way of improving EE, leading to greater performance. A resource-effective way of doing this is through employee referrals as much of the recruitment process is already completed, however this has the possible downfall of limiting diversity in the workforce – the wide implications of which have not been covered within this paper.

HPW has been shown to increase performance. HPW practices have been shown (with Purcell’s People-Performance Model (Purcell et al. 2003) to do this through achieving an engaged workforce (measurable through the level of DB being exhibited by employees). The drivers for EE are employee commitment, motivation and job satisfaction, which if managed well with good people management (by front-line managers) and good HPW practices, will create a positive feedback-loop between them and DB, and thus high performance and outcomes.

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