Effects of Employee Engagement
Effects of Employee Engagement
Effects of Employee Engagement
SERVICE INDUSTRY
Dr. Rabiya T. S. Sange, Assistant Professor, Human Resources,
Allana Institute of Management Studies, Mumbai
[email protected]
Abstract
Background: As economies develop and there is more choice of employment, organizations will find it increasingly
challenging to attract and retain talent and potential. This change in economic conditions would mean being less
dependent on manufacturing markets and more focused on service industries. This increases the importance of employees
becoming brand ambassadors. In a race to survive in a highly competitive service industry, most organizations realize that
a satisfied employee does not necessarily mean a loyal employee and a high performer. Moreover, in times of diminishing
loyalty, employee engagement is a powerful retention strategy. The fact that it has a strong impact on the bottom line adds to
its significance, thus making employee engagement an essential tool in managing human capital (Sarah Cook, 2008).
Objective: The research paper aims at investigating the effect of employee engagement on attrition in organizations with
special reference to service industry.
Methodology: Secondary data sources were used to understand the existing literature on the topic. Survey, personal and
telephonic interviews were used to gather data from primary sources. HR professionals of 64 organizations from the
service industry were surveyed.
Results: Correlation and Regression analysis was applied to the dataset using SPSS 15. The Hypothesis Employee
engagement practices significantly affect employee attrition was accepted at 0.01 level of significance.
Conclusion: It was found that employee engagement strategies do have a significant effect on reducing the attrition rate in
organizations. However, a more serious consideration in exploring the relationship between the two variables needs to be
made by the organization to have an impact on bottom line results.
Key Words: Attrition, Retention, Employee Engagement, Service Industry, Business Environment
1.
INTRODUCTION
The business environment around is full of trials and
many executives are facing an acute challenge of making
the people changes that they feel are necessary to rapidly
improve performance whilst maintaining employee
engagement. The success of organizations in a changing
economy is tied in large measure to the creative and
innovative energy from the most significant asset:
employees. When employees are effectively and
positively engaged with their organization, they form an
emotional connection with the company. This impacts
their attitude towards the companys clients, and thereby
improves customer satisfaction and service levels.
Successful employee engagement helps create a
community at the workplace and not just a workforce.
India and Brazil have young and plentiful growing
workforces; China has one of the worlds largest but
oldest populations. Retention issues are already
beginning to emerge in these countries with workers
quick to leave for better remuneration and higher job
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2.
LITERATURE REVIEW
2.1 Employee Engagement Evolution & Concept
Engagement at work was conceptualized by Kahn,
(1990) as the harnessing of organizational members
selves to their work roles. In engagement, people
employ and express themselves physically, cognitively,
and emotionally during role performances.
The term employee engagement, in its present usage,
was coined by the Gallup Organization, as a result of 25
years of interviewing and surveying employees and
managers. Their intent was to create a measure of
workplaces that could be used for comparisons.
According to Buckingham & Coffman (1999), Gallup
spent years refining a set of employee opinion questions
that are related to organizational outcomes. The
statistically derived items, called the Gallup Workplace
Audit (GWA) that measure employee engagement are
related to productivity, profitability, employee retention
and customer service at the business unit level (hospital,
hotel, factory, etc.). They report that employees who
score high on the questions are "emotionally engaged" in
the work and the organization (Sources quoted by Little,
2006).
Melcrum Publishing (2005) found that from a global
survey of over 1,000 communication and HR
practitioners 74% began to formally focus on the issue
between 2000 and 2004.
The term has shown up in Workforce Magazine (2005),
Harvard Business Review (2005) and the Washington
Post (2005), not to mention the websites of many Human
Resources consulting firms such as DDI (2005) and
Towers Perrin (2003) (Sources quoted by Little, 2006).
The term seems to be attractive for at least two reasons:
a)
Employee engagement has been shown to have a
statistical relationship with productivity,
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4.
HYPOTHESIS
H1: There will be a significant negative correlation
between employee engagement and attrition rate in
organizations.
5.
5.1
a)
RESEARCH METHODOLOGY
Sources of Data
Secondary Data: The research paper has used
secondary data sources like books, magazines
and journals to explore the existing literature on
the topic. Various e-journals and websites were
also reviewed to arrive at an understanding of
the variables under consideration.
b)
Primary Data: A questionnaire was developed to
investigate employee engagement strategies and
to find the attrition rate of organizations. HR
professionals of 64 organizations from service
industry were approached to collect data with
regards to the variables under study.
5.2 Questionnaire Description
Questionnaire developed was based on Robinsons
model of the drivers of employee engagement. Sample
questionnaires from the internet included Gallups 12
point questionnaire and a questionnaire developed by
Scarlett Surveys also helped in framing the statements
used in the questionnaire.
The questionnaire was designed to understand employee
engagement strategies implemented by organizations
and its effect on attrition. It included items to measure
employee engagement strategies from an organizational
perspective as well as some other items which aimed at
gathering information regarding attrition rate in
organizations. The questionnaire consisted of 37 items
out of which five point rating scale was used for 33
statements (where 1 strongly disagree and 5 strongly
agree), two items involved direct response in terms of
attrition rate and reduction in attrition rate respectively,
four items involved nominal scale and ordinal scale was
used for one item.
Cronbach Alpha reliability for the 33 items in the
questionnaire was found to be 0.949 which is considered
to be in the range of excellent reliability score (George &
Mallery, 2003).
5.3 Operational Definitions of Variables
1.
Employee Engagement: A positive attitude
held by the employee towards the organisation and its
values. An engaged employee is aware of business
context and works with colleagues to improve
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6.
DISCUSSION OF RESULTS
High profits and fast paced growth, dont tell the full
story about many companies in Indias economy
(Nancherla, 2009). Enhanced technology and booming
economy have given rise to numerous employment
opportunities. This is creating a pressure on senior
executives, human resource professionals as well as line
managers who realize that employees who feel uncertain
about their careers or who find better opportunities
elsewhere would leave the company causing a talent gap.
All this has led organizations to use different strategies to
retain their talent pool. Further, a number of researchers
have found that lack of investment in employee
engagement strategies invariably force an organization
to bear a high cost in terms of lost customers and increase
in employee attrition.
The researcher wanted to investigate whether
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KEY FINDINGS
Findings from literature indicate that reasons
for employee attrition vary across industries as
well as individual differences do creep into the
whole process. Some of the reasons for
Vol. 7 Issue - 1 : April : 2015
8.
I M P E R AT I V E S F O R F U T U R E
RESEARCH
The present research highlights the fact that employee
engagement initiatives significantly reduce attrition rate
in organizations. Future researches can aim at finding the
reduction in attrition rate in organizations due to
employee engagement initiatives.
9.
CONCLUSION
The present research found that organizations which
score high on implementation of employee engagement
strategies have a lower attrition rate. Correlation Analysis
used to test the hypothesis under consideration was found
to be significant at .01 level. Regression analysis revealed
that 40% of the variation in attrition can be explained by
employee engagement initiatives.
Employee attrition is both a straightforward and complex
issue. The ray of hope for HR executives and line
managers, who struggle to keep their talented employees,
is to systematically build employee engagement
initiatives into their work culture. Further the effect of
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(http://www.melcrum.com/offer/etee/surveysummary.p
df)
Nair, H. & Gavane, A. (2008); Is Attrition and Retention
Bogging You?; para. 1-4.
(http://www.citehr.com/70462-attrition-retentionbogging-you.html)
Nancherla, A. (2009); Indias Attrition Problem;
Training & Development; March 2009
Robinson, D., Perryman, S., Hayday, S. (2004); The
Drivers of Employee Engagement, Institute for
Employment Studies; IES Report 408, para. 4-6
( h t t p : / / w w w . e m p l o y m e n t studies.co.uk/pubs/summary.php?id=408)
Wetzels, M., Ruyter, K. & Lemmink, J. (1999); Role
Stress in After-Sales Service Management; Journal of
Service Research; 2 (1), pp. 50-67.
http://www.haygroup.com/downloads/in/Retention%20
study%20India%20press%20release%20Final.pdf
http://www.thehindu.com/business/Industry/attrition-akey-worry-for-hr-managers/article2982117.ece
Table 5.1: Descriptive Statistics for Attrition Rate and Employee Engagement Total Score
N
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Minimum
1
Maximum Mean
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15.25
38
102
Std. Deviation
8.808
76.45
13.882
Table 6.2: Pearson product moment correlation coefficient for employee engagement total
score with attrition rate calculated for last year
employee engagement
total score
employee
engagement
total score
Pearson Correlation 1
Attrition
rate for
last year
-.638(**)
Sig. (1-tailed)
N
.000
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Independent variable
Employee Engagement
total score
r2
F
Sig
0.407 42.520 46.192 .01
qqq
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