CHAPTER 2
Lack of employee commitment is the main threat for the survival of the organization as a loss of competent employee is a loss of competitive advantage for the organization. Employees who are committed to their organization and engaged in their work are vital for the company as they provide crucial competitive advantages which results in higher productive rate and lowers employee turnover rate. Therefore it is vital to understand the importance of building employee commitment and its impact on organizational performance. Further, the relationship between these concepts is worth examining as a means to provide casual effect or antecedents to behaviors which drive either positive or negative conditions in the workplace.
This chapter will explore the importance of building employee commitment for the success of the organization and the factors influencing on employee commitment and its impact on the organizational performance.
2.2- Employee commitment
The trust, security and knowledge that each other needs, plus views and opinions are being considered as the qualities that maintains commitment strong in any kind of a relationship. For an example a married couple; even though they love and care each other, their views and opinions would be different in some circumstances. Therefore the trust between them and knowledge those shares to communicate each other will only help them to understand each other and maintain their relationship. Likewise at work, these characteristics become more important than the worth of financial benefits and incentives. In fact, a simple “thank you” from a senior to a subordinate would impact more than financial rewards on overall employee satisfaction.
There are numerous definitions of employee commitment which are found in the literature. The study of employee commitment has been an important and main part of the literature on organizational behavior for several years which has been advanced in many directions.
Becher, (1992) describes organizational commitment as “Having desire to stay within the organization, identifying him or herself with the organizational goals primarily without caring financial benefits” and Buchanan has described the organizational commitment as: “Commitment is partisan, affective attachment to the goals and values of an organization, to one’s role in relation to the goals and values, and to the organization for its own sake” (Buchanan, 1974). There is a psychological link between the employee and the organization that makes it less likely that the employee will voluntarily leave the organization (Abbot et al. 2005).
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According to Meyer and Allen’s (1991), review of organizational commitment research literature which was supported by Dunham, Gruba and Castaneda (1994), indicates that employee’s commitment to the organization can be characterized into three different “mind sets”. And they are Affective commitment (AC), Continuance Commitment (CC) and Normative Commitment (NC). Affective commitment is defined as the employee’s positive emotional attachment to the organization, which means an employee who is affectively committed to the organization strongly involves with the goals of the organization and desires to remain as a part of the organization. Continuance Commitment is defined as the individuals commits to the organization and their willingness to remain in the organization because they perceives high cost of losing the organizational membership such as close working relationships with their co-workers, the unique job skills which they have acquired to a particular company, career and retirement investments, years of employment in that particular company and other benefits which make it too costly to leave the job and find another job elsewhere. Normative Commitment is the individual commits and have a feeling of obligation that makes them to remain with the organization. These feelings may derive to such reasons like, the organization may have invested some resources for the training & development of an employee who then believes it is a moral obligation to stay with the organization and repay the debt. Therefore they should be loyal and make personal sacrifice for the organization. Below, Figure 2.1, presents a schematic representation of the three component model of commitment.
Figure 2.1: Three component model of commitment
Source: Adapted from Meyer and Herscovitch, (2001)
Affective Commitment
Continuous Commitment
Normative Commitment
DESIRE
COST
OBLIGATION
Personal characteristics
Personal involvement
Shared Values
Personal characteristics
Investment
Lack of alternatives
Personal characteristics
Organizational investments
Personal sacrifice
Socialization experiences
EMPLOYEE BEHAVIOR
COMMITMENT
All three types of commitment concludes with a common view which states that commitment is an emotional attachment which describes the relationship between the employee and the organization and also has implication for the decision whether to continue or discontinue membership in the organization. Meyer & Allen (1991) argued that the main reason for characterized among the different types of organizational commitment was that although all three types of commitment tend to bind employees with the organization, they have very different implications for behavior. In fact, a research shows that affective commitment has the strongest positive relationship with organizational citizenship behavior, job performance, and attendance followed by normative commitment. Continuance commitment has a tendency to be unrelated or negatively related to these behaviors.
2.3- Organizational Performance
The organization is a part of an economic system which responds to the market place, competition and fluctuating resources and how well the organization can survive depends on its ability to adapt to the demands of its external system. Therefore organizational performance is very important to measure how well the organization is performing in the market and to increase the potential for the success of the company.
Organizational Performance is an analysis of a company’s performance such as evaluating its goals and objectives. The three primary outcomes which can be analyzed within an organization are: financial performance, market performance and shareholder value performance (Business Directory.com). The focus of attention is almost entirely on financial measures of performance where conceptually it has been observed as the comparison of the value created by a firm with the value owners expected to receive from the firm (Alchian & Demsetz, 1972; Barney, 1995). Venkatraman and Ramanujam (1986), argued as the narrow performance construct of financial performance had dominated the strategic management literature, and put forward a broader performance construct as “business performance” including both financial and operational indicators, and also proposed a construct known as “organizational effectiveness” which would consist of business performance as well as account for the success of the goals held by various stakeholders, and organizational effectiveness is known as how well an organization performs its business activities. To carry out these business activities effectively, an efficient workforce is important.
Wright and McMahan (1992), defined Strategic Human Resource Management (HRM) as the pattern of planned human resource activities and deployments intended to enable the organization to achieve their goals. In the area of Strategic HRM, Dyer and Reeves (1995), in a review of research on the effectiveness of ‘bundling’ HR practices, they proposed four possible types of measurements for organizational performance as below;
HR outcomes (employee turnover, absenteeism and job satisfaction)
Organizational outcome (productivity, quality, service)
Financial Accounting outcome (Return On Assets, profitability)
Capital market outcomes (stock price, growth, returns)
And they came up with; HR strategies were most likely to directly impact HR outcomes followed by other three outcomes. This is because; Human Resource Management is concerned with the support and maximizing organizational performance and profit by effectively managing employees with a focus on expanding customers base that provides revenue for the company. Therefore it is clear that HRM can influence organizational performance as HRM plays an important role in carrying out the business functions of each and every department of an organization since it can have a direct influence on the employees who are working in those departments. Furthermore, Armstrong (2006), has defined HRM as a strategic and coherent approach of an organization’s most valued asset; the people working their individually and collectively who contributes to achieve the organizational objectives.
However, how effectively companies manage their human resources has become a critical component for the success of the business. Employee engagement, satisfaction and employee commitment are positive employee outcomes of effective HRM. As discussed above, the more committed the employees are, the more productive they are and employee’s commitment is important as they contributes to the success of the organization and perform better which ultimately increases overall performance of the organization. Employee commitment also can be used as an important instrument to measure performance of the organization.
2.4- Importance of building employee commitment for the success of the organization
Building organizational commitment is one of the main objectives of human resource policies and practices.
According to a study (Mowday, 1998), it appears to be an affective commitment level of individual employees affects on the overall performance of the organization by linking a specific human resource management system. Tsui, Pearce, Porter, Tripoli (1997) found that organizational investment on employees was associated with higher levels of employee affective commitment, as well as higher levels of citizenship behavior, greater intention to stay with the organization, and lower absenteeism.
It is clear that lower absenteeism plays an important role to enhance the productivity level of the organization. As productivity level increases, there will be positive impact on overall organizational performance. To enhance this productivity, the organizations must have the best employees who work for the betterment of the company, not only people who works and get their pay. Employees will work an organization without getting absent and for the betterment of the company only if they have an interest in doing their job. It is vital for the company to increase the attendance as it impacts the survival of the company.
Porter et al. (1974) discuss the above mentioned three major components of organizational commitment as being “a strong belief in and acceptance of the organization’s goals, a willingness to exert considerable effort on behalf of the organization, and a definite desire to maintain organizational membership”. Mowday et al (1979) further states that affective communication is “when the employee identifies with a particular organization and its goals in order to maintain membership to facilitate the goal” (p.225). Meyer and Allen (1997) continue to say that employees retain membership out of choice and this is their commitment to the organization.
Some of the researches prove that commitment has a positive result on productivity, employee turnover, and employee willingness to help their colleague or their co-worker. But in recent years, this commitment has reduced due to downsizing, decreasing the salaries, and productivity demands. While this commitment reduces, the use of work team has been increasing. This is because; employees believe that working as a team can enhance their productivity by empowering them and involving them in significant jobs. On the other hand, the teams are formed of employees with different attitudes and behaviors will definitely create conflicts. And these conflicts may result in absenteeism, turnover or intention to quit. Therefore, team success also depends on the level of employee commitment, because highly committed employees continuously struggle for excellence and act to find resolutions for those problems. The less committed they are, the less energy and thought they devote to overcome and more time they spent on creating problems (Benett S. Simonton, 2011).
Meyer et. al (1993) and Baugh & Roberts (1994), both authors found that committed employees had high expectations of their performance and as a result they performed better, while Meyer & Allen (1997), continue to explain the reasons why performance and commitment may not be related as some factors include the significance with which supervisor value the appraisal process; the value of job performance by the company and the level of employee control over the outcome. However research also found that, employees who are committed to their profession are more committed to the organization too. Baugh & Roberts (1994), also found that those employees who were committed to both their organization and their profession had high level of job performance.
2.5- Factors influencing on employee commitment and their performances
The organizations are significantly changing as the demands for the latest and higher quality products and services are ever-increasing. To remain competitive in this challenging environment, building employee commitment is extremely important for organizations as without employee commitment there can be no development in any part of the business activities. In fact, commitment may be the key source of competitive advantage especially in times of labor scarcity.
However, organizational commitment also can be changed over time with the attitudes of the employees. From a research (Becker, Billings, Eveleth & Gilbert, 1996), of among 281 participants, they found that commitment to the supervisor and the supervisor’s values was more strongly related to performance ratings than was employee commitment to the organization. Allen & Meyer, 1993, Buchanan, 1974, and Hall et al. (1977) have found there to be a positive relationship between an employee’s age and time with the organization and their level of commitment. Studies also found that character of employee such as leadership and communication styles have an effect on organizational commitment (Decottis & Summers, 1987).
The workplace is a dynamic field, and to remain competitive it is crucial for organizations to acquire loyal employees who will work for the betterment of the company. Therefore the relationship between employees and their organizations have become vital to the effective functioning of the workplace. These relationships affects on employees as well as the company (Meyer et al. 2001). Positive outcomes could be such as good attendance, participation and low turnover (Abbott et al. 2005) while negative outcomes could be such as low productivity, high turnover rate and absenteeism.
However, there are number of factors that influence on employee’s commitment to the company either positively or negatively, but in this study, researcher will discuss four of them such as Job satisfaction, Employee engagement, motivation and leadership style and how these four factors affect their overall performance.
2.5.1- Job Satisfaction
Job satisfaction is one of the main aspects of organizational psychology, and has become as one of the most difficult area facing for today’s managers when it comes to managing their staffs. Robbins (2000), refers Job satisfaction as individual’s general attitude towards his/her work. A person with a high position in the organizational hierarchy has a positive attitude towards the organization and is satisfied with performance on the job, while an unsatisfied employee has negative attitudes and creates problems within the organization among his/her colleagues and clients.
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Cranny, Smith & Stone (1992), indicates as “managers, supervisors, HR specialists, employees and citizens in general are concerned to find out the ways how to improve job satisfaction”. Judge, Hanisch & Drankoshi (1995), supports the view point stated by Cranny et al. and recommend for all Human resource Managers to be aware of all those aspects within the organization that might have an impact on most of the employees’ job satisfaction and by developing these aspects would be benefit for both parties; employees and the organization in the long run.
Numerous researchers argue as job satisfaction can be formally defined as the degree to which individuals feels either positively or negatively about their work (Steyn & Van Wyk, 1999). This means that, if the employees preferred expectations are met, he/she will experience a feeling of accomplishment which therefore results in determining the level of satisfaction. The greater the degree of their expectations being met, the higher will the level of job satisfaction be. Job satisfaction also can be referred as the feeling and attitude people have about their job; positive and enthusiastic attitudes towards their work indicated job satisfaction while negative and apathetic attitudes towards their work indicates job dissatisfaction (Armstrong 2006). According to Bateman & Snell (1999), employees will be satisfied only if they are fairly treated by the outcomes they obtain or the processes that are implemented. On the other hand, they also advice that, always a satisfied employee may not necessarily be a productive member for the organization, job satisfaction can also represent as a feeling of enjoyment or pleasure that creates from a worker’s impression of his/her employment.
Job satisfaction can be defined as a sense of achievement and success on the job, which means it is supposed to be directly linked to productivity plus to personal well-being. An individual who is satisfied with his/her job will perform better and being rewarded for their effort, which is known as job satisfaction implies enthusiasm and happiness with his/her work. According to Kaliski, job satisfaction is the key ingredient that leads to recognition, promotion, income and the achievement of other goals that lead to feeling of fulfillment (Kaliski, 2007).
How happy an employee performing his/her job has profound results on their behavior and commitment? From meta-analysis (laffaldano & Muchinsey, 1985), it is evident that those employees who enjoy their work, work harder and stay longer with the company than those who do not enjoy their work. In relation to commitment, job satisfaction and work-life satisfaction are very important. Job satisfaction is a vast area but in short a satisfying job normally has three characteristics, and they are:
It has intrinsically enjoyable features: Mathieu & Zajac (1990) found that the strongest correlation with commitment were obtained from job characteristics, mainly job scope (job enrichment)
It provides opportunities for growth and development
It makes employee to feel their effectiveness in their role (they can positively influence on organizational outcomes).
A positive relationship between job satisfaction and commitment using a variety of measures has been consistently written in the literature (Balfour & Wechsler, 1990, 1991: Cook & Wall, 1980: Green et al. 1996). A research conducted by Vanderberg & Lance (1992), among 100 professionals in the information services for five months showed a strong relation between job satisfaction and loyalty, which proved that higher the degree of job satisfaction, higher the level of employee loyalty.
Job satisfaction causes a series of influences on different aspects of organizational life such as employee productivity, loyalty and absenteeism. Lack of job satisfaction is the major problem leads to absenteeism, while in contrast; absenteeism is a possible indicator of lack of job satisfaction (Hulin & Teven, 2008). It is obvious that dissatisfied employees are more likely to get absent for work than those who like their jobs, as absenteeism is a symptom of job dissatisfaction (Thomson, 1993). The level of absenteeism directly affect overall organizational performance as it decreases productivity; because the company have to cover up the indirect cost involved in hiring new staffs and to pay overtime for employees.
However, all the employees who are not attending the workplace cannot be said as they are not attending work, because they are not satisfied by their job, but they might have some other problems too. And there are people who will still attend their work but they are not satisfied, as for reasons like if they are threatened by deduction from their salary for the days they do not present for work. Therefore to avoid this employee will be keeping reporting daily to the work, but not because that he/she likes the job but as he/she don’t have any other option (SHRM, 2009).
On the other hand, a study done by Gruneberg (1979), suggest that even though the size of the relationship was small, there was a relationship between job satisfaction and absenteeism. And some researchers (Alder & Golan, 1981; Blau, 1985; Sagie, 1998; Ulleberg & Rundmo, 1997 as quoted in Ehlers, 2003) have found that job satisfaction supposed to influence absenteeism rate. While (Alder & Golan, 1981 as quoted in Ehlers, 2003) discovered as employees with low level of job satisfaction shows a high non- attendance behavior than who has high level of job satisfaction.
Therefore it is crucial to find out whether the employees who are getting absent are due to job dissatisfaction and the one who is present is satisfied by the job. Based on the above literature, following hypothesis was inferred in this study;
H1: There is a relationship between Job satisfaction and absenteeism, when job satisfaction level is high; the rate of absenteeism is low.
2.5.2- Employee Engagement
Human resource is the best resource which can obtain by an organization. The key success and the way to gain competitive advantage for any organization is the ability to acquire high competent workforce. And a well functioning organization would be the result of its healthy, committed and motivated employees; such as “engaged employees”. Schmidt et al. (1993) as cited in Siddhanta and Roy (2010), describes employee engagement as a modernized version of job satisfaction, which is known as employee involvement, commitment and the satisfaction with their work. The employees would be engaged only if they are committed to their job and show interest and indeed excitement about what they do. It also involves the loyalty, trust and pride they have about the organization and the enthusiasm to support for the company and a sense of personal responsibility to make organization more successful.
Employee engagement also has a great relation with job satisfaction. Robinson et al. (2004) describes employee engagement as ‘a positive attitude held by the employee towards the organization and its values”. Employee’s satisfaction with their job and pride about the company shows the extent to which people enjoy and believe in what they carry out for work and the perception that their company values on how well they perform. The greater an employee’s engagement, the more likely he/she are to put extra effort and deliver excellent on-the-job performance. The more an employee is satisfied with his/her job; the more he/she engaged in their work, and engaged employees contribute more for the bottom line of the company. Gallup organization describes employee engagement as the involvement with and enthusiasm for work and Dernovsek (2008) as cited in Sridevi & Markos (2010), relate employee engagement to employees’ positive emotional attachment and employees’ commitment.
Engaged employee consistently demonstrates three general behaviors which improves organizational performance; and they are:
Say: engaged employees always speak positively about the company to colleagues, potential employees and customers
Stay: engaged employees have an intense desire to be part of the company
Strive: engaged employees willingly put extra effort and engaged in behaviors that contribute to the success of the company (Baumruk & Gorman, 2006)
Several studies have found positive relationship between employee engagement and organizational performance outcomes such as employee retention, productivity, profitability, customer loyalty and safety. Research also indicates that engagement is positively related to customer satisfaction (Coffman, 2000; Ellis & Sorensen, 2007; Hewitt Associates, 2004; Heintzman & Marson, 2005; Coffman & Gonzalez-Molina, 2002). According to (Towers Perrin -ISR, 2006), there has been an increase of practitioner literatures supporting the belief that engaged employees positively impact on the organizational performance and sustainability. Their ISR’s new global employee engagement study disclosed that companies with highly engaged employees performs better and show stronger bottom line results when compared to companies whose employees had low engagement score. And (Schneider et al. 2009), believes that if the organizations want to survive and compete on customer satisfaction and differentiate themselves in financial and market performance, they must engage their employees. When employees becomes more engaged, the intention of leaving the organization becomes less and they will be more concerned on meeting customer’s needs (Rama Devi, 2009). They impact their attitude towards customers and therefore improve customer satisfaction and service level. How much employees are willing to support their products and services which company offers for its customers relies mostly on their perceptions of the quality of those goods and services they offer. Therefore the level of employee engagement is completely linked with the level of customer engagement, as the engaged employees voluntarily would help to satisfy their customer’s needs. And the organizations that deliver their brand promise through their engaged employees will definitely gain advantage as it would directly impact customer loyalty, profitability and market share.
There is no doubt that employee engagement is the key driver for organizational success as high level of engagement leads to retention of talents, promote customer loyalty and improve organizational performance. An engaged employee only will make an effort to give the customer a reason to return and purchase more goods and services. As a result of building customer loyalty and retention over time; the direct contact between employee and customer can indirectly affect revenue growth. Employees will do this by the help of the other employees, who do have direct contact with customers, by pioneering an innovation that boost sales (Towers Perrin Talent Report, 2003). On the other hand, a research shows that every unsatisfied customer will tell at least eight people about their experience Melcrum (2008) as cited in Strandberg (2009) and engaged employees are the company’s best defense that can fight against this virus. And employees, who align their values with the organizations, are more likely to promote customer satisfaction and loyalty (Strandberg, 2009). Therefore, by understanding the close link between employee engagement and the customer satisfaction, management should place engagement at the centre of their plans to secure the future of the company (Pollitt, 2008).
Based on the above literature, following hypothesis was inferred in this study;
H2: There is a relationship between employee engagement and customer satisfaction
2.5.3- Motivation
There is lots of analysis that concludes as the human resource management is the source of sustainable competitive advantage for the business, rather than obtaining access to capital and use of technology. Successful companies are those that believe their human resource as their most important asset. And HRM is crucial for the whole function of an organization as it helps to build loyal employees who are ready to give their best for the success of the company. A motivated employee is a loyal employee and only loyal employees will support to achieve actions and objectives of the company, as well as a motivated, engaged and encouraged workforce could generate long-term productivity.
In fact, Boxall and Steeneveld (1999), argues as it is not important to prove the relationship between firm’s critical influence on performance and employees; as it is apparent that the quality of human resource management will impact on the overall performance of the organization. Employees try to satisfy in what they are performing on the job and at the same time management should understand the issues faced by their employees and try to find ways to satisfy their employee’s needs and wants.
From several definitions it can be observed that, motivation is basically concerned with factors that lead to drives certain human behavior. According to Reena et al, 2009 (as cited in Quratul-Ain Manzoor, n.d), there should be an ‘invisible force’ to push employees to succeed personal and organizational goals. According to Luthans (1998), motivation is a method that produces, boosts, directs and maintains behavior and performance; which means that, it is a method of inspiring people to act to achieve a desired task. And one way to inspire people is by using effective motivation method which makes employees more satisfy and committed to their job (Luthans, 1998).
Halepota (2005), describes motivation as “a person’s active participation and commitment to achieve the agreed results”. Further he explains that the concept of motivation is just an abstract as different approached create different results at different times and there is not a single strategy which gives favorable outcomes all the times. And Antomioni (1999), suggest as, the amount of effort employees willing to perform their job depends on the degree to which they feel their motivational needs would be satisfied. Conversely, employees get de-motivated if they feel something in the company stop them from achieving a desired result.
According to Smith (1994), as cite in Lindner (1998), motivated employees are important as they help organizations to survive as well as they are more productive. Some of the symptoms arise due to lack of motivation includes; high employee turnover, higher absenteeism rate; higher level of waste materials; low morale and declining productivity. Whereas a positive motivation philosophy and practice helps to improve productivity, quality and service, and as motivation helps employees to achieve goals, gain a positive perspective, build self-esteem and capabilities and try to manage own development and help others (About.com Human Resources).
It is clear that, motivated employees will give their best to achieve the organizational goals and objectives. Lots of research has been done on motivation, but the reason why every employee in the organization does not perform at their best level has been somewhat not studied. The reality is that different employees can be motivated in different ways and organizations need to find out ways and tactics to motivate each employee based on their personal needs and wants.
Managers and Management researchers believes that it is not possible to achieve organizational goals without having a long-term committed workforce in the organization. Motivation is a human psychological feature that contributes to an individual’s level of commitment which consisting of factors that cause, direct and maintain human behavior in a particular committed direction (Stoke, 1999
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