Issue 6

Employee engagementAugust 2011

APS Human Capital Matters: Employee engagement August 2011, Issue 6

Editor’s note to readersWelcome to the sixth edition of Human Capital Matters—the digest for time poor leaders and practitioners with an interest in human capital and organisational capability. This edition focuses on the concept of employee engagement and its application to the public service workforce.

The contribution of employee engagement to organisational performance is central to many of the human capital reform initiatives advocated in Ahead of the Game: Blueprint for the Reform of Australian Government Administration. Importantly, there is an open question on whether the features of employee engagement in the public service differ from that of other organisations. The Australian Public Service Commission is working with other agencies on clarifying not only the key features of APS employee engagement but also what contribution engaged employees make to enhancing organisational capability.

The concept of staff engagement has an enormous amount of currency in the business world today; for many the pursuit of ‘engaged’ staff is seen as an end in itself. But there are a broad range of definitions and interpretations of employee engagement in the literature: some are heavy with psychological theory while others link employee views and organisational strategy. However, there are common themes: for example, engagement is seen as a two-way interaction between the employee and their workplace, engagement is believed to lead to positive organisational outcomes, and finally, it is considered to be measurable through an employee survey. These themes are consistent across a literature that ranges from pamphlets produced by management consultants through to refereed articles in scholarly journals.

However, key differences in the literature arise around the notion of engagement and its relationship with organisational capability. In much of the management consultant literature, engagement is seen as a unitary concept, often derived statistically from an employee survey administered to hundreds or even thousands of employees. In the academic literature, engagement is more often seen as a multi-faceted concept embracing a range of psychological experiences and social interactions. Similarly, in much of the management literature, engagement is perceived as a desired outcome, and the evidence for a direct link to organisational outcomes will be assumed or unstated, or perhaps even tenuous. For instance, in some studies, a relationship with real organisational outcomes is clear but the causal nature of the relationship is less clear. Finally, in the academic literature, great effort is made to identify factors that can be measured in order to demonstrate the importance of engagement but the link between these and workplace outcomes is at times not strong.

The literature on the topic of staff engagement is very broad. This derives from both the conceptual maturity of the concept and the complexity of the issue. The concept of employee engagement makes intuitive commonsense to leader, manager and employees in terms of its potential impact on organisational performance. It represents a conjunction of practice and theory but with the former driving the latter, rather than the reverse.

The articles reviewed in this edition of Human Capital Matters reflect this recognition.

About Human Capital MattersHuman Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational

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capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice.

Comments and suggestions welcomeThank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters@apsc.gov.au. Readers can also subscribe to the mailing list through this email address.

Corporate Leadership Council (CLC), ‘Building Engagement Capital: Creating and Leveraging Sustainable Employee Engagement’, March 2011, (Report), 136 pp (entry by CLC membership password; obtainable via website).The report examines a question central to employee engagement. CLC research suggests that some 70% of US business leaders see employee engagement as being critical to achieving commercial objectives, but only 20% believe that engagement initiatives are driving business outcomes at their organisation. This is a comprehensive study containing best practice and quantitative research that address potential causes of engagement underperformance. One of the study’s key findings is that organisations which build workforces with high engagement capital levels perform 23% better against a number of criteria than those with low levels of engagement capital.

The report’s introductory essay, ‘Building Engagement Capital’ (pp. 1–25) sets out nine ‘imperatives’ for creating and leveraging sustainable employee engagement:

1. Role Clarity (leverage teams to translate goals into day-to-day work).2. Career Management (align employees to jobs by capabilities and interests, and then

leverage teams to support career steps).3. Performance Management (foster peer-to-peer informal feedback).4. Networking (build relevant connections that help employees execute work successfully).5. Rewards (focus on non-cash awards).6. Work Environment (enable employees to demonstrate obvious impact on the

organisation).7. Values (enable employee ownership and protection of values).8. Decision-Making (leverage high engagement capital to improve talent management

decisions).9. Strategy Execution (use engagement capital data to improve implementation of business

strategies) (p. 25).

The Corporate Leadership Council is a US public administration research organisation which works through its constituent groups, chiefly the Corporate Executive Board and CLC Human Resources, to conduct, disseminate and implement the outcomes of its best practice HR research.

Jamie A. Gruman and Alan M. Saks, ‘Performance Management and Employee Engagement’, ‘Human Resource Management Review’, Vol. 21, No. 2, 2011, pp. 123–136.The authors note the increased recent emphasis by organisations on utilising their performance management systems to enhance employee effectiveness. They take this approach further by

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arguing that generating greater employee ‘performance increments’ may be best achieved by harnessing the performance system to promote higher employee engagement levels. For this purpose, they present a new model of engagement management.

They point out that, although performance evaluation is at the centre of performance management, the complete process encompasses a wider canvas, one which includes organisational policies and design features that interact to influence employee performance. In essence, this ‘configurational’ approach to strategic human resources management is based on the recognition that patterns of HR activities and factors rather than single drivers (e.g. performance management) contribute to realising organisational objectives. What has earlier been termed ‘bundling’ of HR practices—in this case integrating employee engagement into performance management activity—is proving to be effective in improving organisational performance.

The authors argue that performance management and employee engagement are of corresponding importance within what they term the’ engagement management process’, which begins with goal setting and the framing of a ‘psychological contract’ between supervisor and employee. Their model involves both the well-established performance appraisal process as well as engagement appraisal discussions in which supervisors and employees discuss engagement factors such as role expansion, pro-activity, persistence, and adaptability. Goals for engagement are agreed upon and included in an individual’s general appraisal as a central element of their Employee Development Agreement (EDA)—a broad assessment measure encompassing both performance and engagement evaluation.

The EDA model calls for a stronger managerial orientation than that required at each stage of the traditional performance measurement process. For example, it recasts the role of supervisors by requiring them to play a greater role in energising employees. The authors recognise the importance of this change and recommend that managers should be given special training to enable them to address it.

Jamie A. Gruman is Associate Professor, School of Hospitality and Tourism Management, and Department of Business, University of Guelph, Ontario. Alan M. Saks is Professor of Organisational Behaviour and Human Resources Management, Centre for Industrial Relations and Human Resources, University of Toronto.

J. K. Harter, F. L. Schmidt and E. A. Killham, ‘Employee Engagement, Satisfaction, and Business-Unit-Level Outcomes: A Meta-Analysis’, (Report), The Gallup Organisation, Omaha, NE, July 2003, 54pp.This report—a seminal work in the employee engagement field—extended the focus of engagement data analysis from consideration of employee opinion data at the individual level to an emphasis on data gathering at the ‘business-unit’ or ‘workgroup’ level. The authors see the latter as being critical to sound engagement analysis, largely because business-unit-level research generally provides better opportunities to establish links to outcomes that are directly relevant to most organisations—outcomes such as productivity and employee turnover (the report also sets out the methodological advantages of this approach).

However, the authors acknowledge the limited data available to those undertaking workgroup level studies, due to a small number of organisational units (i.e. the number of business units becomes the sample size), and/or to the limited access to outcome measures that can be compared across units. For these reasons, the report argues that many existing studies lack statistical power and their results often conflict. Accordingly, the authors employ meta-analysis

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techniques as a means of generating more rigorous outcomes. The report presents the results of an updated meta-analysis of the relationship between employee workplace perceptions and business-unit outcomes, based on data collected from Gallup Organisation clients.

The study focuses on the 13 statements included in the Gallup Workplace Audit (GWA), which were selected because of their importance at the business-unit or workgroup level. These measure employee perceptions of the quality of people-related management practices within their business units. In designing the items included in the GWA, researchers identified two broad categories of employee survey items: those that measure attitudinal outcomes (satisfaction, loyalty, pride, customer service intent, and intention to remain with the organisation) and those which measure actionable issues that drive the above outcomes.

The report also includes 12 factors (the Q12 items) that measure the extent to which employees are engaged in their work, and which are therefore of particular value to supervisors in measuring engagement levels and enhancing engagement (pp. 6–8). These include:

Opportunity To Do What I Do Best. Recognition for Good Work. Encourages My Development. Mission/Purpose.

James K. Harter and Emily A. Killham are on the staff of the leading research and polling body, the Gallup Organisation, and F. L. Schmidt is based at the University of Iowa.

JRA, ‘Employee Engagement: Stories of Success’, (Report), November 2008, 37pp.This publication is the third in a JRA series exploring the concept of employee engagement. The first publication in the series, the ‘Green Book’ (2006), put forward the case for an engagement strategy by focusing on the link between engagement and bottom-line performance. In 2007, the ‘Blue Book’ examined post-survey processes and explored how organisations had gone about converting the insight gained from their survey and engagement analyses into action. This publication takes the process a step further by examining in greater detail specific initiatives that have been developed based on earlier survey and analysis work.

The report draws on JRA’s experience between 1999 and 2008 of running the JRA Best Places to Work in New Zealand Survey and its other consultancy work with corporate clients. It is a practically-focused publication which explores how a diverse range of organisations have strengthened their overall capability using the four pillars of JRA’s Anatomy of a Great Workplace model: Vision and Values, Sense of Community, Developing People, and Performance Culture.

The study, which is based on the responses of more than 20,000 employees from over 200 organisations, identified 12 primary drivers of engagement. These are: personal sense of belonging to the organisation; jobs that provide people with a sense of personal achievement; the sense that one’s contribution is valued by the organisation; confidence in the leadership of the organisation; a personal belief in what the organisation is trying to accomplish; a sense of common purpose within the organisation; jobs that meet employees’ current needs and expectations; knowing how one’s work contributes to the success of the organisation; career and personal development opportunities; sufficient involvement in job related decision-making; fun in the workplace; and work that makes full use of peoples’ knowledge and skills.

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JRA (formerly John Robertson & Associates) was established in 1993, and is now among New Zealand’s leading providers of workplace surveys, especially in the area of employee engagement.

Nancy R. Lockwood, ‘Leveraging Employee Engagement for Competitive Advantage: HR’s Strategic Role’, (Report), 2007, 11pp. The author sees employee engagement as a key driver of organisational success. High engagement levels enhance retention, customer loyalty, organisational performance and stakeholder value. She also recognises the complexity of the concept, one shaped by many factors—from workplace culture, organisational communication and managerial styles to trust and respect, leadership and organisational reputation. For a new generation entering the workforce, greater access to training and career opportunities, a re-definition of work-life balance and new perceptions of empowerment within the workplace are all important.

This provides a special opportunity for HR to devise, measure and evaluate innovative workplace policies and practices that help organisations attract and retain talent equipped with the skills and competencies necessary for sustainable growth. While recognising that employee engagement strategies are very much determined by an organisation’s mission and culture, the author nevertheless sets out 11 strategic actions which HR could profitably pursue in strengthening engagement.

These include: clearly and consistently communicate organisational goals and objectives; align organisational goals with day-to-day work; maintain an open dialogue between senior management, managers and employees; through initiatives like a pulse check determine what factors most affect engagement; hold managers accountable for demonstrating organisational values, developing team members and results; and ensure that employees understand how they can best contribute to an organisation.

The Society for Human Resource Management (SHRM) is a large professional HR association based in Alexandria, Virginia, USA. Nancy R. Lockwood is Manager of its HR Content Program.

William H. Macey and Benjamin Schneider, ‘The Meaning of Employee Engagement’, ‘Industrial and Organisational Psychology’, Vol. 1, 2008, pp. 3–30, (Article),This article is an ambitious attempt to define employee engagement. The authors proceed on the basis that, at the time of writing, the concept was a relatively new one that had been ‘heavily marketed’ by HR consulting firms. However, in their view, it had not received the attention it warranted from academic researchers. They also argue that attempts to harness it in driving organisational capability have long been bedevilled by ‘competing and inconsistent interpretations of the meaning of the construct’.

In defining it, they demonstrate that the term is used at different times to refer to a range of psychological states, traits, and behaviours as well as their antecedents and outcomes. However, this comprehensiveness can be a problem in clearly identifying causal factors, and consequently when devising approaches aimed at enhancing engagement. Therefore, in order to better understand these factors and devise engagement strategies, the authors put forward a series of propositions concerning what they call: 1) psychological state engagement (job satisfaction, organisational commitment, psychological empowerment, job involvement); 2) behavioural engagement (adaptive attitudes and actions that support organisational effectiveness); and 3) trait

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engagement (a collection of interrelated attributes which incline a person to take a positive view of work).

The authors advance propositions surrounding job attributes and leadership as central drivers in shaping all three engagement types. In addition, they discuss measurement of the three types, in particular that pursued via employee surveys. They also emphasise the importance of the key literature in directly influencing employee engagement practice and in creating a working model which can be adapted over time to address new engagement challenges.

The study addresses other factors which are important in implementing effective employee engagement strategies. These include trust. They argue that the presence of a respected ‘transformational leader’ with a sound understanding of engagement directly affects trust levels throughout the organisation and, thus, behavioural engagement levels. They also stress the role of values in creating an environment conducive to implementing successful engagement strategies.

William H. Macey is on the staff of the Valtera Corporation, a management consulting firm based in Illinois, USA. Benjamin Schneider is Professor of Psychology at the University of Maryland and has a consultancy role with the Valtera Corporation.

David MacLeod and Nita Clarke, ‘Engaging for Success: Enhancing Performance through Employee Engagement’, (Report for the UK Government), July 2009, 152pp.This review of employee engagement throughout the UK concluded that a greater focus on employee engagement and broader awareness of its elements and benefits could improve outcomes for public and private sector organisations and individual employees. It is based on extensive survey and workplace research as well as assessments of several engagement initiatives. The report is a detailed and resource-rich analysis of the subject.

The authors found many examples of successful engagement practice in business (e.g. the Tesco supermarket chain) and in government (e.g. the London Ambulance Service), and concluded that the challenging economic situation had prompted a growing understanding of the need for better cross-government collaboration in delivering public services. A key tool for achieving this was innovative employee engagement strategies. The report referred to the Civil Service’s intention to carry out a service-wide survey of employee engagement covering some 500,000 civil servants. The October 2009 survey was the first such survey; a second was conducted in 2010 and the third is planned for September–October this year. These have been coordinated by the Employee Engagement Team within the Cabinet Office.

The report discusses the literature suggesting that engagement is measurable (pp. 10–11), and that it can correlate with performance levels (pp. 11–12) and innovation (pp. 12–13). However, the authors are cautious about making definitive links in these cases, though they note the evidence that government departments with high engagement levels perform well in capability reviews (p. 13). The report’s core recommendation is that government should work with other sectors to raise national awareness of the advantages of high engagement levels—not by means of legislation or regulation but through culture change initiatives. It prescribes three approaches to begin the process.

First, provide more tailored support to organisations wishing to foster engagement, for example, web-based assistance to facilitate easy access to best practice experience and research as well as coaching and advice. Secondly, better align existing government engagement development mechanisms in order to deliver engagement outcomes. Thirdly, through conferences, workshops,

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regional road shows and the publication of research papers extend knowledge and understanding of engagement. These three activities are designed to make possible a nationwide discussion of the topic—one involving all key stakeholders as well as individuals.

David MacLeod held senior positions in the UK private sector (e.g. Dulux, ICI) before becoming an adviser to the British Government on change management. Nita Clarke, Vice-Chair of the MacLeod Review, has served as a ministerial adviser and is now Director of the Involvement & Participation Association.

4-Consulting in association with DTZ Consulting & Research, ‘Employee Engagement in the Public Sector: A Review of Literature’, (Report), Scottish Executive Social Research, May 2007, 64pp.Early in 2007, these firms were commissioned by the Scottish Executive to conduct research into the state of employee engagement in Scotland’s public sector and how the Executive could improve the engagement of its employees. A two-stage approach to the task was adopted—Stage 1 comprised a literature review covering engagement in the public and private sectors, and Stage 2 covered the state of engagement within the Scottish public sector and how it could be improved. This report provides an overview of the key findings of Stage 1.

The report contains a trenchant examination of the employee engagement literature. Its findings are grouped under three headings: Key Findings, Gaps and Shortcomings, and Overall Conclusions. Examples of particular interest are:

Key Findings (large-scale quantitative survey evidence suggests that the majority of employees are neither engaged nor disengaged, with only some 10% to 30% of employees fully engaged with their work; the models of employee engagement that have been developed can be applied equally to the public and private sectors; it is clear that the subject has moved beyond HR discussion and analysis into mainstream strategic and operational management;).

Gaps and Shortcomings (an area requiring more research is how organisations can best go about recruiting staff who have a higher engagement propensity; the importance of the different factors underpinning employee engagement has not been tested with sufficient rigour through surveys or by other means; little real consideration has been given to calculating the costs of achieving higher levels of engagement).

Overall Conclusions (although the importance of employee engagement has been demonstrated, the extent to which it can lead to significant change in organisational performance is uncertain; some approaches to enhancing engagement (as measured by surveys of staff satisfaction with working conditions) clearly are effective, but links to wider impacts in areas such as client service are more tenuous; even in the absence of robust impact data, the principle of employee engagement deserves endorsement and support by public sector leaders as an important tool in managing their organisations).

The authors are Scottish consulting firms which were engaged by the Executive of the Scottish Parliament (the Scottish Executive) to undertake this review for the Executive’s Social Research Program.

US Office of Personnel Management (OPM), ‘Federal Employee Viewpoint Survey 2010’, OPM, Washington, DC, 2010, (Report), 42pp.The annual Federal Employee Viewpoint Survey (the FedView Survey) (formerly the Federal Human Capital Survey) is the principal tool used by the Federal Government and its public

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sector to measure employee satisfaction, commitment and engagement levels among its employees. The survey reflects responses from more than 250,000 public servants. Its earliest version appeared in 2002 and it is now an annual publication.

For present purposes, the most interesting aspect of the report is not the survey results but how the OPM is reconciling the use of the FedView Survey’s long-established Job Satisfaction Index with what it perceives to be a clear need for better measurement of employee engagement levels. The latter, OPM argues, more accurately reflects the extent of employee passion, commitment and involvement: ‘An engaged employee is seen as one who is immersed in the content of the job and energised to spend extra effort in job performance’ (p. 20). In dealing with this issue, the OPM acknowledges the difficulty presented by the fact that the conditions leading to engagement and those leading to job satisfaction are in many instances similar or identical.

Although the FedView Survey does not therefore contain direct measurements of employee feelings of engagement such as passion, commitment and involvement, it does include questions that cover most, if not all, of the conditions likely to lead to employee engagement. In order to differentiate engagement measurement criteria from the elements of the Job Satisfaction Index, the OPM developed and included in the FedView Survey an index which explored (‘tapped’) the conditions that lead to engaged employees. It consists of eight survey questions (Figure 4 ‘Conditions for Employee Engagement’ (p. 20)) and is set out below:

Q3 I feel encouraged to come up with new and better ways of doing things. Q4 My work gives me a feeling of personal accomplishment. Q6 I know what is expected of me on the job. Q11 My talents are used well in the workplace. Q47 Supervisors/team leaders in my work unit support employee development. Q48 My supervisor/team leader listens to what I have to say. Q53 In my organisation, leaders generate high levels of motivation and commitment in

the workforce. Q56 Managers communicate the goals and priorities of the organisation.

The report is produced by the Planning and Policy Analysis section of the Office of Personnel Management, the US Government’s HR management agency

Employee Engagement in BriefThe large US human resources research and analysis company, the Kenexa High Performance Institute (KHPI), recently released the findings of its international study of current (and projected) workplace participation among ‘Millenials’ or Gen Ys (those born between 1982 and 2003), of whom there are more than 80 million in the USA alone. Its research suggests that, contrary to some long-held perceptions, Millenials do not expect preferential treatment at work; nor are they more difficult to manage than other workforce age segments. The findings were based on analysis of the KHPI’s annual WorkTrends survey for the past 25 years. In 2011, the survey interviewed more than 30,000 people across the working-age spectrum in 28 of the world’s largest economies (including Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, Spain, the UK and the USA). KHPI found that 60% of Millenials are extremely satisfied with their employers; even more of them (63%) report that they have ample opportunities for growth and development in their work. This contrasts with results of 54% and 49% respectively for Baby Boomers and 54% and 51% for Generation Xs.

A global survey by Deloitte’s has found that Baby Boomers (those born between 1946 and 1964) are more dissatisfied with their employment than employees in other generations. Among the

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main reasons for this are inadequate supervisory support and recognition. One-quarter of Boomers identified dissatisfaction with their employers as one of the three main factors that would cause them to look for new employment during the next 12 months, compared to 18% of Gen Xs (born between 1965 and 1982) and 11% of Gen Ys, or Millennials (born between 1982 and 2003). The survey of employees working in 350 organisations worldwide revealed that 32% of Baby Boomers cited ‘lack of trust in leadership’ as another significant turnover trigger—the principal reason for leaving their employer compared to 22% of Gen Xs and 19% of Gen Ys. The main reason for this result appears to be the Baby Boomer belief that, especially following the Global Financial Crisis (GFC), when many of their contemporaries were made redundant, they feel undervalued and their actual and potential contributions largely unrecognised.

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