The effect of performance management systems on employee engagement

Introduction Background Prior research has established the positive effects of employee engagement in the workplace, not only for the organisation in its entirety but also for the wellbeing and productivity of individual employees (Kahn, 1990). It is therefore of paramount importance that research correctly identifies the factors which give rise to increased employee engagement and investment in their job. Rich, Lepine and Crawford (2010) found in a study of 245 fire fighters that engagement, conceptualised as the investment of one’s complete self into a job role (the degree to which a job role is integrated into a personal construct) was a significant mediator in the relationship between value congruence, perceived organisational support, core self-evaluations and the dependent variable: job performance dimensions. Aside from the obvious benefits, including increased productivity and employee initiative, this also suggests that there are psychological perks for employees with higher rates of engagem ent. Increased self-efficacy, job satisfaction, self-esteem and morale have been found to be direct consequences of higher rates of employee engagement (Bakker and Schaufeli, 2008; Harter, Schmidt and Hayes, 2002). Employee wellbeing in the workplace is known to correlate with positive business outcomes (Harter, Schmidt and Keyes, 2003). Overall, engaged employees are more likely to view their job as meaningful, their management and leadership as above average, have better perceptions of their own ability to perform their duties and are more likely to be satisfied with their jobs, leading to a greater work ethic and better performance (May, Gilson and Harter, 2004). The research question The research problem we are facing is to determine the antecedents of employee engagement in the workplace. The questions that will be used to investigate this will query the relationship between management policy and employee engagement. The objective of this study will be to determine whether performance management strategies used by companies affects in any capacity the tendency of employees to fully engage themselves in the workplace. The experimental hypothesis will be that increased use of performance management strategies in the workplace increases rates of employee engagement. Performance management is the independent variable and employee engagement will be the dependent variable. This will establish whether one significant facet of management policy affects employee engagement; an important factor in predicting effectiveness in the workplace. However there are other factors which could potentially influence the dependent variable (employee engagement) which are beyond the scope of this study. There may be many aspects of the individual and their chosen career which affect how engaged they are regardless of management policy. In addition, Saks (2006) found that multiple facets of how an organisation handles employees’ work ethic determines how engaged they are in the workplace, including how much training is provided and perceived effectiveness of procedural justice at work. Isolating performance management will be one step in building a framework to more fully predict employee engagement. If the anticipated effects are discovered, this would be valuable information for businesses wishing to enhance employee productivity and satisfaction using the medium of employee engagement. By establishing the antecedents of employee engagement it will be possible to fill in another gap in the overall model presented by research to predict positive business outcomes. It has been vehemently established that employee engagement can indirectly affect this outcome, but the influences resulting in greater engagement have received relatively little attention. Performance management in particular was chosen since it encapsulates something that is under the direct control of businesses, and will therefore potentially offer an immediate and practical means for businesses to affect employee engagement. Literature review This section will incorporate definitions of the variables involved and the theoretical context of employee engagement and its antecedents. It will also cover some of the research into other factors besides the independent variable for this study which could reasonably affect the independent variable. Employee engagement The definition of employee engagement is surprisingly ambiguous in the literature, which led Macey and Schneider (2008) to gather and categorise the various definitions found in research. They found that authors generally referred to engagement in one of three broad domains; psychological state engagement, behavioural engagement and trait engagement. The effect of management, leadership, company policy and any performance management strategies employed by the business are of course effective only at the behavioural and psychological state level; trait level engagement is innate and relatively constant in each individual, and arises from various psychometric variables. The conceptualisation we shall settle on for this study will therefore involve only the psychological state and behavioural levels, since the primary independent variables of interest involve factors the business can influence to increase employee engagement. Theoretical context for employee engagement Within a theoretical context, employee engagement fits well into the explanatory remit of self-determination theory (Deci and Ryan, 1985). This theory postulates that different forms of motivation exist; autonomous regulation refers to all volition which originates from genuine internal desires, as opposed to controlled regulation in which the source of the impetus to act is external. In terms of engagement at work, autonomous regulation is desirable, as it results in greater initiative and productivity at a task. According to Meyer and Gagne (2008), who explored the underlying psychological mechanisms of autonomous regulation in the workplace, the key lies in satisfying basic psychological needs for competency, autonomy and relatedness. Performance management systems are likely to be a part of building the work environment which successfully cultivates these feelings in employees; giving them a sense that their needs have been met. Although of course there is certainly more involved in determining the extent to which employees are personally involved in their work than need satisfaction. Intervening factors are likely to include employee personal circumstances and the current economic climate. Performance management For the purposes of this study, the definition of performance management shall be the degree to which intervention by the business occurs to ensure recognition of above average performance, and involvement with offering incentives for increased productivity and work ethic. All other variables listed above which have been identified as causal antecedents of engagement will be considered as confounding variables in this study, and will be controlled for as far as possible. According to Roberts (2001), performance management involves the setting of objectives, the use of appraisal systems, reward strategies, training and feedback. This is a definition that can be more easily operationalized as the components are clearly divided which will make development of measurement scales for each subset simpler. Therefore these are the components that shall be measured as the independent variable in this study to make up performance management. Theoretical context for performance management Performance management affects employee perceptions and attitudes, which subsequently affect performance (Hartog, Boselie and Paauwe, 2004). This fits in with the theoretical framework which places employee engagement as reflecting attitudes and the meaning ascribed to job roles. It is therefore logical to expect that higher levels of implementation of performance management strategies would be significantly related to employee engagement. Although this theoretical framework does not leave much room for the inclusion of the position individual employees ascribe to their jobs in their lives. It is relatively simplistic in terms of modelling the expected effects, and there are likely to be confounding variables. Intervening variables Research has uncovered some general factors which contribute in various magnitudes to the level of employee engagement. Job characteristics (van der Broeck, Vansteenkiste, de Witte and Lens, 2008) perceived organisational support (including leadership), procedural justice, learning and training opportunities and performance management strategies (including rewards and recognition management) are all important in predicting the level of engagement an employee is likely to exhibit (Saks, 2006). This study will address one aspect of the bigger research question then; the explanatory power of performance management over employee engagement will be established. The issue will require further research to account for other possible influences on engagement, and potential interaction effects between independent variables. The originality of this study then lies in the examination of a relatively newly recognised concept (employee engagement) and shedding light on the specific relationship it has with performance management strategies, independent of other influences. Methodology This section will describe the proposed method of examining the experimental hypothesis, including how data will be gathered, what will be measured, and how the data will be analysed. Design and procedure Since the sample is limited to one business many confounding variables such as differing job demands and organisational structure can be eliminated. The samples will be taken from historical data, from employees working within a business with relatively low levels of performance management compared to similar organisations. The business under study will have to be one which has at some point implemented a new, more involved performance management strategy; this is how the independent variable will be manipulated. Both levels of employee engagement and performance management will be measured before the implementation of the new performance management strategy to serve as the control data. After the new strategy has been imposed and levels of performance management have increased in the business, the independent and dependent variable will be measured again, and this data will serve as the experimental condition. To establish the persistence over time of any significant differences in the dependent variable found to result from the change in performance management strategy, three samples will be taken at six month intervals after the implementation of the new strategy. If there is any initial difference in employee engagement between the samples immediately before and after the new strategy comes into for ce, the subsequent samples taken after the strategy has been present for some time will tell us about the long term effects of increasing performance management, otherwise the possibility remains that any effects are merely short term and fade when employees become accustomed to the new system. This will therefore be a repeated measures design. The rates of employee engagement will be compared between temporally differing samples, which will determine if changing levels of performance management alone were sufficient to affect a change in engagement, and how any effects persist, weaken, or strengthen with time. Participants Data will be gathered from secondary sources extant in the literature. The ratings of employee engagement and performance management strategies will be gathered from employees and managers working within the same business. Model specification The model we have to test (based on prior research in the area) places employee engagement as dependent in part on performance management. An a priori power analysis will be conducted on previous studies examining employee engagement to determine the expected effect size. Operationalisation of variables Performance management will be defined as the number of rewards and punishments handed out by senior management, the amount of time employees spend in training, and how often employees are appraised. Employee engagement will be measured with subjective rating scales and peer ratings. Analysis Statistical analysis of this data would include one-way analysis of variance. First performance management would be measured in each group to ensure that in reality there was a change due to the implementation of the new strategy. Then the degree of variability in engagement can be examined between conditions. The relative impact of increasing performance management can be examined in the short and long term, which could help in our theoretical understanding of the psychological underpinnings of any effects observed; if the effects change over time, this will provide clues for future research to investigate, and give use evidence to speculate further on why the change took place. This method of statistical analysis will allow for simple comparisons between control and experimental groups, and for different levels of the experimental condition, in this case the amount of time elapsed after the implementation of the new strategy. Limitations Since the data will all be gathered from the same business, many confounding variables will remain constant between groups, however this means the findings may be less applicable to other business contexts. There is also the fact that a substantial time will have passed between conditions, meaning there may have been other changes other than the independent variable under study, which could confound the results. All other pertinent factors will be investigated and accounted for in the final report to ensure they remain as consistent as possible. It is also essential to recognise the fact that different individuals harbouring different internal traits and psychological dispositions will be motivated to engage in their workplace by different factors which are meaningful to them personally. This is especially true between individuals with radically differing job characteristics and duties since they are likely to have different expectations of their job, and view their relationship to their job role differently. However the influences on engagement cited here have been shown to be generally applicable despite differing job roles. Psychological factors of unique individuals may also play a role in shaping how well specific employees fit into their job role. May, Gilson and Harter (2004) found that perceived meaningfulness of job role, perceived safety at work (including co-worker relations and perceived job security) and availability of psychological resources relevant to job demands are all positively correlated with employee engagement. Such factors may be positively influenced directly by effective performance management but are otherwise outside the scope of this study. The fact that different employees are likely to have been used between conditions (due to the time elapsed) could also pose a problem due to their potential to have very different opinions, experiences and traits relevant to their work life which could influence employee engagement. Limitations include the fact that not all influences on the outcome variable have possibly been considered in the analysis, although there are good theoretical grounds for including the variables that are present. There is likely a myriad of intervening factors affecting how much employees engage at work, but focusing on ones that are immediately under the control of the business administrators and relatively logistically sound to implement makes the most sense as a starting point for this line of research. References Bakker, A. B., & Schaufeli, W. B. (2008) Positive organizational behavior: Engaged employees in flourishing organizations. Journal of Organizational Behavior, 29(2), 147-154 Den Hartog, D. N., Boselie, P. and Paauwe, J. (2004) Performance management: a model and research agenda. Applied psychology, 53(4), 556-569 Harter, J. K., Schmidt, F. L. and Hayes, T. L. (2002) Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: a meta-analysis. Journal of applied psychology, 87(2), 268 Harter, J. K., Schmidt, F. L. and Keyes, C. L. (2003) Well-being in the workplace and its relationship to business outcomes: A review of the Gallup studies. Flourishing: Positive psychology and the life well-lived, 2, 205-224 Kahn, W. A. (1990) Psychological conditions of personal engagement and disengagement at work. Academy of management journal, 33(4), 692-724 Macey, W. H. and Schneider, B. (2008) The meaning of employee engagement. Industrial and Organisational Psychology, 1, 3-30 May, D. R., Gilson, R. L. and Harter, L. M. (2004) The psychological conditions of meaningfulness, safety and availability and the engagement of the human spirit at work. Journal of Occupational and Organizational Psychology, 77(1), 11-37 Meyer, J. P. and Gagne, M. 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