Mann and Harter (2016) defined employee engagement as “the level of commitment and involvement an employee has towards his organization and its values”. Mishra et al. (2015) considered employee engagement as the degree to which individuals are attentive to and absorbed in performing their roles. Gallup (2016) described an engaged employee as “emotionally invested and focused on creating value for their organization every day”. From the definitions of the employee engagement, itself it can be understand the extent to which employee engagement can influence company performance.
Organizational performance lies at the heart of a firm’s survival. In very generic terms, Organizational performance has been defined as a set of both financial and non-financial indicators capable of assessing the degree to which organizational goals and objectives have been accomplished (Kaplan and Norton, 1992). The drive for organizational success is rooted to employees that are engaged; these employees possess characteristics that include behavioral factor, which is the employee’s efforts in their work; emotional aspect, the employee’s feelings about the organization; cognitive engagement, employee belief of the organizations culture, leaders, and the overall organization (Lockwood, 2007; Saks, 2006). Thus, to drive company performance, employee engagement acts as an essential factor.
In
simple terms, it can be said that there is a relationship between employee
engagement and organizational performance by stipulating that when employees
are engaged and committed, organizational performance also improves (Kazimoto
2016).
Kazimoto
(2016) further revealed, that employee satisfaction always yields higher
profitability as a result of improved productivity. In a similar study, it was
stated that employees with higher engagement levels tend to reduce staff
turnover and absenteeism which results in higher organizational performance.
According to Farouk (2014), employee engagement impacts on organizational
productivity as engaged employees exercise care in what they do in their
efforts to contribute to the success of the organization through a greater
sense of ownership and accountability. In doing so, they become less absent
from work, more willing to take on more responsibility, and have increased
initiative to do the work
The
synopsis of the result by Soni (2013), indicated that in the Gallup Study nine
performance outcomes were studied: Customer loyalty/engagement, profitability,
productivity, turnover, safety incidents, shrinkage, absenteeism, patient
safety incidents and quality (defects) and employee engagement is related to
each of the nine studied performance aforementioned outcomes. Results show
consistent correlation across different organizations. Studies have shown that
employee engagement has a positive influence on organizational performance,
following relationships among Performance outcomes and Employee Engagement can
be derived as illustrated in the Figure 01 below.
Figure 01: Relationship Between
Employee Engagement and Organizational Performance
Further, Kaliannan and Adjovu (2014) also found that committed and/or engaged employees are the recipe for attaining organizational goals through higher productivity. Farouk (2014) agreed that employee engagement impacts on organizational productivity as engaged employees exercise an element of care in what they do and in their efforts to contribute to the success of the organization through a greater sense of ownership and accountability. The 2016 meta-analysis also verified that employee engagement relates to productivity (Gallup, 2016).
The following table 01 shows, performance indicators in the perspective of Staff retention, market capitalization, and profit for the year and return on equity for the year 2019 of four leading private Banks in Sri Lanka, which heavily prioritize employee engagement in their strategy formulation and implementation.
Table 01: Performance Indicators of Banks
Which Heavily Focus on Driving Employee Engagement.
|
Bank |
No
of employees as at
31st December 2019 |
Staff
Retention Ratio for 2019 |
Market
capitalization Ranking for 2019
Rs/Bn |
Profit for the year 2019 Rs/Bn |
Return
on equity for 2019 |
|
Commercial Bank |
5,027 |
96% |
97 |
17 |
13.54% |
|
Hatton National Bank |
4,913 |
93% |
69 |
14 |
11.54% |
|
Sampath Bank |
4,134 |
98% |
61.9 |
11 |
11.78% |
|
National Development Bank |
2,936 |
93% |
22 |
5.1 |
13.73% |
Therefore, it can be said that employee engagement has a positive impact towards bank performance in a highly competitive business environment which is volatile, uncertain, complex and ambiguous. To further remain competitive and to sustain, the banks will essentially need to focus on employee engagement on ongoing basis.
Without
any doubt it can be said that organization with engaged employees have higher
employee retention as a result of reduced turnover and reduced intention to
leave the company, productivity, profitability, growth and stakeholder’s
satisfaction. On the other hand, companies with disengaged employees suffer
from waste of effort and bleed talent, earn less commitment from the employees,
face increased absenteeism and have less customer orientation, less
productivity, and reduced operating margins and net profit margins (Markos
& Sridevi, 2010).
Thus,
there is a clear direct relationship between employee engagement and company
performance. More engaged employees; better organizational performance.
References
Commercial
bank Annual Report, 2019.
Farouk,
I., 2014. Exploring employee attitude and productivity at electricity company
of ghana, ashanti-east. Journal of Human Resources Management 5(4).
Gallup, 2016. Gallup employee engagement survey report [Online].
Available:hhttps://www.sf.k12.sd.us/images/docs/school_board/school_board_reports/2017/10A%20-
%20GallupEmployeeEngagementSurveyReport.pdf [Accessed November 27, 2020].
Hatton
National Bank Annual Report, 2019.
Kaliannan, M. & Adjovu, S. N., 2014. Wining the talent war via effective employee engagement: A case study. Journal of Business and Financial Affairs, 3(3)(3).
Kaplan,
R. S., & Norton, D. P., 1992. The Balanced Scorecard: Measures that Drive
Performance. Harvard Business Review, 70(1), 71-79.
Kazimoto,
P., 2016. Employee engagement and organizational performance of retails
enterprises. American Journal of Industrial and Business Management, Vol.06
No.04, 6(4)(4).
Lockwood,
N. R., 2007. "Leveraging employee engagement for competitive
advantage." Society for Human Resource Management Research Quarterly 1
(2007): 1-12.
Mann,
A. & Harter, J., 2016. The worldwide employee engagement crisis. Business
Journal.
Markos,
S., & Sridevi, M. S., 2010. Employee Engagement: The Key to Improving
Performance. International Journal of Business and Management, 5 (12), 89-96.
Mishra,
K., Boynton, L. & Mishra, A.,2015. Driving employee engagement: The
expanded role of internal communications. International Journal of Business
Communication, 51(2), 183-202.
National
Development Bank Annual report, 2019.
Saks,
A. M., 2006. Antecedents and consequences of employee engagement. Journal of
managerial psychology, 21(7), 600-619.
Sampath
Bank Annual report, 2019.
Soni,
B. S., 2013. Employee engagement - a key to organizational success in 21st
century. Volce of Research, 1(4).
This is further established by the latest meta-analysis report published by Gallup. The study showed that having highly engaged employees would result in 23% increase in company profitability, while increasing customer engagement by 10% (Gallup Meta-Analysis, 2020). In your post you have shown figures of staff retention if the organization is focused on engagement. In the meta-analysis, staff turnover is shown in two figures; for organizations with high turnover and low turnover. If engagement is improved, organizations with low turnover; the rating was decreased by 43%, while organizations with high turnover, the figure decreased by 18%. This is still quite an impressive figure (Gallup Meta-Analysis, 2020). Therefore it could be stated that employee engagement does have an impact on organizational performance.
ReplyDeleteAccording to Harvard Business Review Analytics Services (2016), Employee Engagement tops as the 3rd highest factor that’s more likely to bring in success as viewed by business leaders. The research conducted around the subject also demonstrates, a highly engaged workforce, while maximizing the investment in human capital and improving productivity can also significantly reduce cost and directly impacts bottom-line.
DeleteEmployee engagement originally results in greater employee performance, which further leads to increase organizational performance (Tower Perrin, 2006). Relationship between employee engagement, customer satisfaction, productivity, profit and employee turnover, which eventually, would lead to increased possibility of business success (Harter et al, 2002).
ReplyDeleteMuch research in the public and private sectors has demonstrated that workforce engagement is significantly correlated with several positive organizational outcomes (Corporate Leadership Council, 2004; Gorman & Gorman, 2006; Harter, Schmidt, & Hayes, 2002; Koob, 2008; Macey, Schneider, Barbera, & Young, 2009; Nierle, Ford, & Shugrue, 2008) including the following: • Higher productivity • Increased profitability • Lower levels of sick leave use • Fewer complaints of unfair treatment • Less work time missed due to workplace injury or illness • Lower levels of attrition • Higher levels of customer satisfaction.
DeleteAccording to Holbeche and Springett (2003), people’s perceptions of ‘meaning’ with regard to the
ReplyDeleteworkplace are clearly linked to their levels of engagement and, ultimately, their performance. They
argue that employees actively seek meaning through their work and, unless organizations try to provide
a sense of meaning, employees are likely to quit. Robinson et al. (2004) define employee engagement as
“a positive attitude held by the employee towards the organization and its value. An engaged employee
is aware of business context, and works with colleagues to improve performance within the job for the
benefit of the organization. The organization must work to develop and nurture engagement, which
requires a two-way relationship between employer and employee.”
Engaged personnel are always optimistic, keep good interpersonal rapport with each other, and also show high level of performance in the organization (Jena, Pradhan, & Panigrahy, 2018). Tiwari and Lenka (2019) revealed that functional, economic, and psychological benefits upsurge employees' level of engagement. Results indicate that internal corporate communication, perceived communication satisfaction, knowledge sharing, continuous learning, and intrapreneurship were positively associated with employee engagement.
DeleteAn "engaged employee" is defined as one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization's reputation and interests. An engaged employee has a positive attitude towards the organization and its values , ( Emprust 2017 )
ReplyDeleteEngaged employees are the one of the most significant factors for an organization, the persons who act as the pillars of any organization that brings positive vibes such as productive ethics and accountability (Levinson, 2007). employee feedback is also very important factor in an organization. Managers should welcome employee feedback for the development and success of any organization. Also. employee engagement and organizational performance, the strategic plan of every organization could be demonstrated in the best way (Kazimoto, 2016).
DeleteOne of the approaches that can be used to improve employee engagement to new comers is the Wallace (2009) reported orientation program. This helps to increase employee trust, organizational engagement, strengthen positive relationships, and good communication between the new employee, the boss, and other close colleagues. All these items are also conducive to increasing employee engagement.
ReplyDeleteExtensive research demonstrates that frequent, open, honest communication between management and employees is crucial to generating trust and high organizational performance. Organizations that receive the “best companies to work for” awards have senior leaders who engage their employees through personal connections and communication. These leaders communicate frequently and personally to employees; speak directly, openly, and honestly to them; are easily accessible to employees; and provide clear direction (Marrelli,2011).
DeleteCoffman and Gonzalez-Molina (2002) describes positive relationship between employee engagement and organizational performance outcomes: employee retention, productivity, profitability, customer loyalty and safety. Researches also indicate that the more engaged employees are, the more likely their employer is to exceed the industry average in its revenue growth.
ReplyDeleteMotivated employees are more engaged in their work (Rich 2006), their performance is of higher quality (Cerasoli et al. 2014) and they profit more from occupational training (Massenberg et al. 2015).
DeleteThis comment has been removed by the author.
ReplyDelete
ReplyDeleteEmployees are inspired and when engaged they do their best to the company they are more customer-focused, are more creative in the field, and are willing to go extra step to meet the goals of the company. From point of organization , the most significant factor; employee engagement has a direct impact on the quality of the company and it's performance (Clarke & MacLeod 2012).
Hi Sohan , an occupied employee is diligent of business context, and works with contemporaries to improve performance within the job for the promotion of the organization. It is a positive approach held by the employees towards the organization and its ethics. Kaye, B., & Jordan-Evans, S. (2003) Employee engagement is a sign of job involvement and the role of the manager to make the workforce engaged.
DeleteIt is noteworthy to state that,performance management is a critical aspect of organizational effectiveness (Cardy, 2004). Because it is the key process through which work is accomplished, it is considered the “Achilles Heel” of managing human capital (Pulakos, 2009) and should therefore be a top priority of managers (Lawler, 2008).
ReplyDeleteThis comment has been removed by the author.
DeleteYes Kelum , According to Swaminathan and Rajasekaran (2010), employee engagement occurs when Satisfaction, Motivation and Effectiveness intersect. Employee engagement has been found to be positively related to individual job performance. Studies have found positive relationship between employee engagement and organizational performance outcomes: employee retention, productivity, and profitability. Employee engagement would be a predictor to organizational commitment, organizational citizenship behavior (OCB), and may lead to intention to leave (Bhatnagar & Biswas, 2010).
DeleteThe relationship engagement and performances based on development of employee engagement with organization. Job challenge, opportunities for development, Autonomy, feedback, variety, fit and rewards and recognition play major roles in the application of employee engagement concept (Crawford, et al., (2013).
ReplyDeleteYes Isuru , Rewards can have a great impact on engaging employees within the organization. It is observed that engaging employees within organization is a very complex process but management must take time to fully develop it. Reward systems should be aligned with the company’s goals and objectives, employee development, company’s strategies and team performance. In order to create a competitive edge organization should maintain the reward system within the organization so that employees work hard and efficiently perform in their work. In the company these programs usually train and inspire associates to become more productive, efficient and respected individuals ( Benazir & Iqbal, 2015).
DeleteRichman (2006) stated that employee engagement is on the decline and there is a deepening disengagement among employees, For example, roughly half of all Americans in the workforce are not fully engaged or they are disengaged leading to what has been referred to as an “engagement gap” that is costing U.S. businesses $300 billion a year in lost productivity (Johnson, 2004).
ReplyDeleteAdding on to your statement , Gallup (2006), proposed that employees could be divided into three types with regard to their level of engagement, Engaged, Not-Engaged and Actively Disengaged, with the later being of most concern to the employer brand as a result of sharing their discontent with their co-worker and the wider world. Managers want to improve employee engagement on grounds that it leads to superior performance, reduces staff turnover and improves the well-being of employees (Macey & Schneider, 2008; Hakanen et al., 2008).
DeleteAdmit your statement and in current challenging environment employee engagement experience and effect both the organization and employees (Osborn and Hammoud 2017). Even employees can utilize contract agreement amenities to encumber the attainment of the goals and objectives of organization and organization capability to anchorage employee engagement blueprint is critical for them (Sun and Bunchapattanasakda 2019).
ReplyDeleteBaumruk (2004) contends that every organization wants to gain competitive advantage and employee engagement is the best tool for achieving it. In fact, employee engagement is considered to be the most powerful factor to measure a company’s vigor and orientation towards superior performance.
DeleteInteresting reading and adding more to this. Researching why companies invest on Employee engagement? Markos & Sridavi ( 2010) answered ,because employee engagement is interwoven significantly with important business outcomes. In this part we will see how employee engagement impacts organizational performance in the light of various research works done. Future more Employee engagement is seen as a motivational factor towards organization’s achieving its objectives. The good environment that is offered to the worker enables him to offer the best that the organization needs for its achievement of goals and objectives (Paluku, 2016).
ReplyDeleteYes Madura , Organizational performance lies at the heart of a firm’s survival. In very generic terms, Organizational performance has been defined as a set of both financial and non-financial indicators capable of assessing the degree to which organizational goals and objectives have been accomplished (Kaplan and Norton, 1992). The drive for organizational success is rooted to employees that are engaged; these employees possess characteristics that include behavioral factor, which is the employee’s efforts in their work; emotional aspect, the employee’s feelings about the organization; cognitive engagement, employee belief of the organizations culture, leaders, and the overall organization (Lockwood, 2007; Saks, 2006). Thus, to drive company performance, employee engagement acts as an essential factor.
DeleteEmployee engagement as “a positive attitude held by the employee towards the organization and its value. An engaged employee is aware of business context, and works with colleagues to improve performance within the job for the benefit of the organization. The organization must work to develop and nurture engagement, which requires a two-way relationship between employer and employee”( Robinson et al. 2004)
ReplyDeleteEmployee engagement comprises two important facets, that is, job engagement and organization engagement (Saks, 2006). An engaged employee always does care about their effort, work, and performance, and employees want to feel that their work, efforts, and performance could make a difference. Employee engagement is usually understood as an inner state of mind, that is, physically, emotionally, and mentally, that binds together the commitment, satisfaction, and work effort in an employee. Engaged employees support the organization to attain its mission, execute its strategy, and generate significant business results. Employee engagement can be enhanced by different HR practices comprising job design, recruitment, selection, compensation, training, and performance management (Vance, 2006).
DeleteRobinson et al. (2004) define employee engagement as “a positive attitude held by the employee towards the
ReplyDeleteorganization and its value. An engaged employee is aware of business context, and works with colleagues to
improve performance within the job for the benefit of the organization. The organization must work to develop
and nurture engagement, which requires a two-way relationship between employer and employee.
Adding on to your statement , employee engagement increases productivity, creates a better and productive work environment, and reduces employee turnover. Engaged employees want good communication with their superiors, work that has purpose for them and motivates them, and a safe working place. When these conditions are met, employees become engaged and as a result Organization will yield better financial results, employees will be proud of their organizations, and demonstrate enthusiasm (Caplan, 2013).
DeleteOn the other hand, Maslow’s Theory which is popularly known as Maslow’s Need Hierarchy is very much interlinked to Herzberg’s Theory. There are five levels of needs as per Maslow; Basic needs, Security, Belonging and love, Esteem and Self-Actualization. Needs of a person should be met as per the lower to higher level to increase the productivity of the Individual (Furnham et al, 1998). Maslow’s Need Hierarchy is used by several organizations for designing their motivational strategies and one of them is HSBC bank (Baker & Hart, 2008).
ReplyDeleteThere is a clear relationship between Maslow's Hierarchy of needs Theory and Herzberg’s Two Factor Theory of motivation. This relationship shows the overlap of higher level needs and motivators and the corresponding overlap of hygiene and lower order needs. The lower needs must be met before higher order needs can have any motivational force and Herzberg's parallel hygiene factors must be met to prevent job dissatisfaction. Maslow's higher order needs serve to motivate people and are of an intrinsic nature which corresponds to Herzberg's motivational factors that are also intrinsic in nature (Osemeke and Adegboyega , 2017).
ReplyDeleteStudies stress the motivational aspect of engagement and show that employee engagement increases productivity and overall performance, creates a productive work environment, reduces non-attendance and employees leaving (Bakker et al, 2005; Salanova et al, 2003).
ReplyDeleteDisengagement and personal engagement are related to the SDT in that an employee’s behavioral state is a key driver of motivation to demonstrating behavior at the professional and personal levels. The engagement level of employees affects the productivity of an organization. The motivation level of an employee is related to job satisfaction. The emotional state of an employee also relates to motivation (Deci & Ryan, 1985). When employees begin to withdraw, and hide their identities, ideas, and feelings, they become disengaged and defensive, resulting in an adverse effect on work performance (Deci & Ryan, 1985).
ReplyDelete