Is Employee Engagement the new key to organizational success?

Enterprises are Shifting Towards Social Intranet

Almost all managers would have the same opinion that motivated, productive engaged employees are essential for organizational success, irrespective of the company size, the type of industry, or corporate strategy.

The question simply is how to motivate them.

Tendering employee’s performance-based incentive pay is one common tried and tested approach. It usually occurs in one of two types:

• Bonuses are offered to individuals based on appraisals of their performance
• Bonuses are offered as organization-wide incentives like profit-related pay or share in ownership.

Occasionally, these incentives do work the way managers intended them to. But many a times these methods of performance based incentives can backfire, causing controversial behaviours among employees, complaints about unfair distribution of incentives, or work overload and stress.

Though these critical issues represent many real problems for business houses, little advancement has been made in gathering facts on how different incentive pay schemes like performance-related pay, profit-related pay, and share ownership can affect employee well-being.

Want to learn more about this relationship?

A Human Resource Management study, examined the extent to which each incentive and pay scheme was associated with employees’ well-being, measured on basis of job satisfaction, organizational commitment, and trust in management. It also surveyed the relationship between various schemes and employees’ experiences of high work intensity and also how this will work on any undesirable influence of incentive pay on well-being.

The senior managers with responsibility for employment relationship, personnel management, human resources, or financial management in one survey stated the main issues related to workplace features, recruitment and training initiatives, pay determination, payment systems, and workplace performance. Another survey provided information on working procedures, working hours, work intensity, and employee well-being. Then the data from the management interviews were then matched with employees’ reports about their individual experiences of work. And this analysis showed that:

• Performance-related pay is generally positively associated with job satisfaction, organizational commitment, and trust in company management.
• Profit-related pay usually does not have similar positive effects; in fact, few levels of profit-related pay resulted in employees being less committed, less engaged and less trusted in their management.
• This contradicts to past studies, in which profit-sharing initiatives had been allied with positive employee outcomes.
• This analysis has revealed some important nuances about profit-related pay. Particularly, many positive effects are still dependent on the level to which profit- related pay is available to a big proportion of the workforce.
• A poorer level of job satisfaction, organizational commitment, and trust in management is seen at low to medium levels of employee participation in profit- related pay. However, at higher levels of employee participation, a higher level of employee well-being is seen.
• However when it comes to share ownership, a direct negative relationship with job satisfaction and minimal or absolute no significant relationships with employees’commitment and trust in management are noticed.
• High employee uptake in share ownership also exposed absolute no significant relationships with employee well-being.
• Of the three incentives pay schemes inspected showed that only performance- related pay was positively associated with the perception that work is more intense.
• In many ways this may be true: employee do feel individual pressure on himself to work harder in order to obtain an individual reward. But, on a relating note, it is found that experiencing this kind of pressure partially( and not completely) offset some of the positive influences on performance-related pay that can have on job satisfaction,
  organizational commitment, or trust in management,

What should managers keep in mind?

The positive relationship between performance-related pay and all the other three well-being outcomes specifies that employees may see increases in pay as a reasonable and even positive trade-off for adding toward organizational success.

In contradiction to what many employers believe, organization-wide incentives such as profit- related pay and share ownership generally do not create such positive effects, as they are found to have negative relationships with employee well-being. The exemption to this argument can be the case of high employee participation in profit- related pay, where, if the methods for distributing organizational profits are alleged to be equitable, more employees are likely to benefit and as a result they will experience job satisfaction, organizational commitment, and trust in management.

Finally it’s still believed that results regarding work intensity and individual-based incentive pay should give managers a break. In a few circumstances, performance-related pay may be experienced as a burden that only provides extra pay for workers through an intensification of the work process. Thus this raises critical questions vis-à-vis the extent to which individual-based incentives can influence employee well-being in a sustainable way and how Employee Engagement will be the new key to organizational success.