Many consultancies provide surveys that claim to measure Employee Engagement. These same companies also publish reports that conclude the more engaged an employee is the more productive they are likely to be.
A Gallup survey in 20121 says that the companies scoring high on Employee Engagement Survey results were 21% more productive and 22% more profitable than companies at the bottom end of the scale. A study for the UK Government2 concluded that many studies show a clear correlation between Engagement and Performance – and most importantly between improving Engagement and improving performance and that a wider take up of Engagement approaches could impact positively on UK competitiveness and performance.
It seems as if CEOs around the world should start engaging their employees to reap the rewards…
Or should they?
The Center for Advanced Human Resource Studies3 identified that “much of the literature that extols the virtues Engagement holds for firm performance lacks the empirical rigor to actually prove Engagement is responsible for them.” In other words, there is little empirical evidence from rigorous scientific studies to demonstrate a correlation between Engagement and performance or to demonstrate that high levels of Employee Engagement cause any significant improvements on the bottom line.
Does a correlation indicate a cause and effect relationship?
Many correlations indicate spurious causal relationships4.
A correlation does not necessarily indicate a cause-and-effect relationship. For any two correlated events, A (Engagement) and B (High Performance), the following relationships are possible:
- A causes B.
- B causes A.
- That there is another variable, C, which causes both, but A never causes B nor does B ever cause A. In other words, A and B are merely consequences of a common cause, but they do not cause each other.
- The correlation is purely coincidental.
For many years, psychologists have concluded that satisfaction follows from the rewards produced by performance5. That is, productivity, high performance and consequent company success causes engagement, which is causal relationship #2 above.
More recently, a growing body of evidence supports the view that Employee Engagement comes as a result of successful business performance, that is, a causal relationship as in #2 above6.
This conclusion goes square against the so-called HR revolution where Employee Engagement is seen as the panacea to fix an organization’s people problems and poor performance. Report after report makes the mistake of assuming the causal relationship is that Employee Engagement significantly determines company performance. These authors really need to find a way to prove this causal direction.
Is there even a significant correlation between Employee Engagement and Performance?
Many of the correlations produced by companies that supply Engagement Surveys are low and many are not significant. The correlations range from 0.09 to 0.2. After statistical ‘tweaking’ they get some correlations to around 0.35. For example, Badal and Harte7 show a correlation of 0.137 between Employee Engagement and ‘Comparable Revenue’ and a correlation of 0.168 between Employee Engagement and ‘Net Profit.’ These are both said to be statistically significant but even a correlation of 0.2 suggests minimal effect and only accounts for 4% of the variance. This is a very small effect. So it is questionable whether we should take any notice of these small correlations between Engagement and Performance.
Conclusions from the research.
If there is a significant correlation between Engagement and productivity, it is that Engagement increases as a result of high individual and company performance, not the other way around. The mean true correlation between overall job satisfaction and job performance was estimated to be 0.30 as reported in a meta-analysis6. The correlation is small but statistically significant, and the meta-analysis indicates that the causal relationships are mostly from performance to Engagement. The effect is moderated by job complexity, personality differences and individual need for achievement. The only outcome from higher Engagement is probably lower attrition rates, although there is even doubt about this. As Dicke et al.3 conclude: “Put more simply, various Engagement measures can be determined to relate to various other measures of organizational and individual performance, but the idea that Engagement actually causes any of these outcomes is, in this context, unable to be proven.”
In an interesting and complex study of a rather wider HR context Wright et al.8 also say that “this study examines how measures of HR practices correlate with past, concurrent, and future operational performance measures. The results indicate that correlations with performance measures at all 3 times (past, concurrent and future) are both high and invariant, and that controlling for past or concurrent performance virtually eliminates the correlation of HR practices with future performance.”
They conclude that “While one could accurately interpret our results as showing HR practices to be part of a ‘high performance’ organization, they certainly do not provide proof that these practices cause that high performance.”
Definition and measurement.
The definitions of Employee Engagement are many and considerably variable. Many definitions of Employee Engagement include ‘productivity and success’ as part of the definition. Well, it is little wonder that there is some correlation between Employee Engagement and productivity when aspects of productivity or performance are included in the definition. For example, Lockwood9 cites the Corporate Leadership Council as defining Employee Engagement as “the extent to which employees commit to something or someone in their organization, how hard they work and how long they stay as a result of that commitment.”
Some definitions are more restrictive. For example the Attitudinal Organisational Commitment (AOC) is defined by Riketta as “the relative strength of an individual’s identification with and involvement in a particular organisation10.”
Another definition states that “Engagement is the degree to which a person is attracted to their work situation and the amount of emotional and intellectual commitment they have to the organization. It involves the physical, cognitive, and emotional demands of the role11,12,13,14.” This definition challenges the researchers to show that their questionnaire is actually measuring the three components of attraction, emotional and intellectual commitment.
The effect of individual differences.
There has been little research on the mediating effect of individual differences such as personality, intellectual ability, or personal values on the correlation between performance and Employee Engagement. In an article entitled “Is the job satisfaction–job performance relationship spurious? A meta-analytic examination,” Bowling15 reported that his research study yielded path coefficients (correlations) ranging from .09 to .23 between satisfaction and performance after employee personality traits were controlled. He concludes that while many people believe that satisfaction causes performance16, his study suggests that “this relationship may not be causal and in fact is largely spurious. Thus, organizational efforts to improve performance by exclusively targeting job satisfaction are unlikely to be effective.”
What is the future for Employee Engagement?
Employee Engagement Surveys tend to be expensive and high profile. In many organizations, all employees complete the survey and want to know the results. It may be fairly obvious what the questions are targeting and employees can manipulate their answers to get the results they want.
Employers need to be very careful when carrying out so-called Employee Engagement Surveys. There is a need to:
- Ensure that the causal relationship between Employee Engagement and Performance is clearly identified
- Be clear about the definition of ‘Engagement’ and that the survey can actually measure the component concepts – very few can.
- Beware not to expend significant resources on an attempt to raise low Engagement scores without first considering whether the likely impact on performance is worth the expenditure.
Business success is more complex than Engagement.
The recent reduction in the use of Employee Engagement Surveys has been because they have not led to improving the organizations’ performance. People and departments that had low ratings have spent considerable effort on improving their rating during the year but have not improved their business performance.
Josh Bersin17 from Bersin by Deloitte says it’s time to rethink the concept of Employee Engagement. “The days of the annual Engagement Survey are slowly coming to an end, to be replaced by a much more holistic, integrated, and real-time approach to measuring and driving high levels of employee commitment and passion.” He also suggests that “using the word Engagement often limits our thinking. It assumes that our job is to reach out and engage people, rather than to build an organization that is exciting, fulfilling, meaningful, and fun.” A high performing company can provide all of these and will create the environment for people to be committed to the company if it creates an appropriate culture rather than focus on Engagement.
Conclusion.
Think carefully about carrying out an Employee Engagement Survey, and think extra carefully about putting resources into improving the ratings. A simple Employee Engagement Survey completed only by key people may help to identify any issues which are considered serious enough to cause those key people to think about leaving. A far more fruitful approach is for HR to take a holistic approach and start with creating a People Strategy and then identify where the most change is required and thereby focus the resources. The objective is to create a high performance organization which thereby is successful which then provides the environment for Engagement.
The four main HR activities which a company can focus on to improve performance are:
- Review the structure and job roles to ensure that they are appropriate and people know what is expected of them and how they should relate to other people.
- Provide a systematic and data driven approach to selection, promotion and succession planning so that you get the right people in the right roles.
- Provide high quality development to ensure that the leaders know how to lead and the managers know how to manage.
- Review and develop a culture throughout the organization which drives and supports the delivery of high performance.
hfi has over 35 years of experience in generating real business results for some of the world’s largest organizations. To hear how hfi can help you achieve your objectives, contact us today!
1. Gallup. (2012). Engagement at work: Its effect on performance continues in tough economic times. Retrieved from http://www.gallup.com/services/176657/engagement-work-effect-performance-continues-tough-economic-times.aspx
2. MacLeod, D., & Clarke, N. (2008). Engaging for success: Enhancing performance through employee engagement. Surrey: Department for Business, Innovation and Skills.
3. Dicke, C., Holwerda, J., & Kontakos, A. (2007). Employee engagement: What do we really know? What do we need to know to take action? Center for Advanced Human Resources Studies.
4. Vigen, T. (n.d.). Spurious correlations. Retrieved from http://www.tylervigen.com/
5. Vroom, V. H. (1964). Work and motivation. New York: Wiley.
6. Judge, T. A., Thoresen, C. J., Bono, J. E., & Patton, G. K. (2001). The job satisfaction – job performance relationship: A qualitative and quantitative review. Psychological Bulletin, 27, 376-407.
7. Badal, S., & Harter, J. K. (2014). Gender diversity, business-unit engagement, and performance. Journal of Leadership & Organizational Studies, 21, 354-365.
8. Wright, P. M., Gardner, T. M., Moynihan, L. M., & Allen, M. R. (2005). The relationship between HR practices and firm performance: Examining casual order. Personnel Psychology, 58, 409-446.
9. Lockwood, N. R. (2007). Leveraging employee engagement for competitive advantage: HR’s strategic role. Alexandria, VA: Society for Human Resource Management.
10. Riketta, M. (2002). Attitudinal organizational commitment and job performance: A meta-analysis. Journal of Organizational Behavior, 23, 257-266.
11. Baumruk, R. (2004). The missing link: The role of employee engagement in business success. Workspan, 47, 48-52.
12. Kahn, W. A. (1990). Psychological conditions of personal engagement and disengagement at work. Academy of Management Journal, 33, 692-724.
13. Richman, A. (2006). Everyone wants an engaged workforce how can you create it? Workspan, 49, 36-39.
14. Shaw, K. (2005). An engagement strategy process for communicators. Strategic Communication Management, 9, 26-29.
15. Bowling, N. A. (2007). Is the job-satisfaction-job performance relationship spurious? A meta-analytic examination. Journal of Vocational Behavior, 71, 167-185.
16. Fisher, C. D. (2003). Who do lay people believe that satisfaction and performance are correlated? Possible source of a common-sense theory. Journal of Organizational Behavior, 24, 753-777.
17. Bersin, J. (2014, October 4). It’s time to rethink the ‘employee engagement’ issue. Forbes. Retrieved from http://www.forbes.com
