Monday, December 1, 2014

Forum for People Performance Management & Measurement

 




 
EXECUTIVE  SUMMARY
 
Linking Organizational Characteristics to Employee Attitudes and Behavior -
A Look at the Downstream Effects on Market Response
& Financial Performance
_______________________________________________________________________
OVERVIEW
 
A set of organizational surveys was Designed to focus on linking
internal performance strategies to market and financial outcomes.
In particular, our goal is to understand the organizational
That the best characteristics engender employee Necessary Attitudes
and behaviors to drive an organization's market and financial
success.
 
Focusing on non-customer contact employees, the study sought to
understand the organizational drivers of employee satisfaction and
employee engagement (the degree of employee motivation and
sense of inspiration, personal involvement, and supportiveness), and
the downstream effects of these employee Attitudes on customers
and financial performance. The data was obtained from a stratified
random sample of 100 organizations in the U.S. media industry,
specifically investigating the Following organizational characteristics:
• Organizational Culture
• Organizational Climate
• Human Resource Systems
• Market Characteristics
 
The effect of these organizational characteristics was studied with
respect to employee satisfaction and engagement, as well as the
downstream effects of these employee Attitudes on market
performance, as measured by customer satisfaction, and financial
performance, i.e., profitability.
 
This Executive Summary Provides an overview of the Key Findings
from the study and then Provides more specific data to support these
Findings.
 

SUMMARY OF
KEY Findings:
 
Key Findings from the study include the Following:
 
• There is a direct link employee satisfaction and Between
customer satisfaction, customer satisfaction and Between
and improved financial performance.
• The key organizational characteristic for explaining employee
satisfaction is organizational communication (a measure of
The downward and upward communication in an
organization).
• Employee satisfaction is a key antecedent to employee
engagement.
- Interaction Between managers and employees with
regards to supportiveness and goal setting, as well as job
Also were the resource key design drivers of employee engagement.
• Organizational culture was another significant driver of
employee engagement, employees must be expected Nowhere
to cooperate and work together, but Also to take charge and
Provide a voice for the customer Within the organization.
- A fully cooperative culture feels the need to reach
consensus on a single option, Nowhere promoting a culture
Provides multiple choices healthy competition the which are
then balanced against one another in an attempt to
develop an optimal solution.
• When individuals and teams are competing to implement the
optimal behaviors oriented to the market and its customers,
Such cans competition work to the advantage of both the
organization and its customers.
• Organizations with engaged employees have customers WHO
Their products use more, and Increased customer usage
leads to higher levels of customer satisfaction.
• It is an organization's employees WHO influence the behavior
and Attitudes of customers, and it is customers of the WHO drive
organization's profitability through the purchase and use of its
products.
• In the end, customers are more satisfied with the WHO an
organization's products are less expensive to serve, use the
more product, and, Hence, customers are more profitable.
 

A focus on market outcomes, eg, customer satisfaction, is
They were the resource persons as warranted found to mediate the relationships Between
Attitudes employee and financial performance.
 
 
Background FORUM
 
What is the Forum for People Performance Management and
Measurement?
 
The Forum for People Performance Management and Measurement
is a research center Within the Medill Integrated Marketing
Communications (IMC) graduate program at Northwestern
University. It is funded by the Incentive Performance Center, the which
is made up of a number of top companies and industry incentive
leaders dedicated to research and educational programs "That
improv human performance in business. A central objective of the
Forum is to develop and disseminate knowledge about
communications, engagement and management Such That
cans businesses better design, implement and manage people-based
initiatives both inside and outside an organization.
 
A number of research initiatives by the Forum are planned over the
next three years to investigate the value and importance of
employee incentives along with the other key issues of
communications, engagement, and management. 3
 
   
Past RESEARCH While a number of studies exist addressing the issues of incentive
programs, employee engagement, and organizational performance,
Including a previous study published by the Forum, the present study
was not Designed to understand the effects of a particular incentive
systems, but rather to understand the organizational characteristics
best suited for creating an environment likely, to engender a satisfied
and motivated workforce, and the downstream market and financial
Effects of Such a workforce. There have been previous research
Efforts to understand these relationships - and these will of some
addressed below - but Few have attempted to model organizational
characteristics, employee Attitudes, customer response, and
financial performance simultaneously, typically due to the difficulty in
Such obtaining data for a reasonable set of organizations.
 
Though there have been empirical studies Some Regarding the link
Between employee and customer satisfaction and financial
outcomes, the results of Such studies have been equivocal at best,
both in terms of the nature of the relationship and its causal
direction. In Addition, all of the previous studies have examined the
relationship in the context of a face-to-face interaction Between
employees and customers.
 
This is the first study of the which We Are aware of attempting to study this
That link in a context does not Involve a face-to-face relationships
Between employees and customers. Those employees engaged in
face-to-face interaction with an organization's customers Often
comprise a small number of the organization's overall human assets.
For those employees not actively engaged in face-to-face
relationships with customers, Their Attitudes and behaviors with
respect to these customers are still vitally Important. For these
employees, Their Interaction with customers is indirect - through the
organization's products and services the which are, themselves, the
result of the market-related activities and behaviors of these
employees. Hence, the products and services produced by the
organization's employees to be consumed by the organization's
customers are the embodiment of the Attitudes and behaviors of the
WHO employees produced Them.
 
In the present research, We study the Attitudes of employees related
to satisfaction and engagement. Individual employees are
Responsible for implementing the activities and behaviors Necessary
for an organization to function, and Some past research has
Such attempted to link Attitudes to organizational performance1
. The
Efforts of these results have been equivocal Often, both in terms of
The nature of the relationship, ie, whether the relationship is direct
                                                 

 Heskett, J. L., Jones, T.O., Loveman, G.W., Sasser, W.E. and Schlesinger, L.A. (1994), "Putting the Service-Profit Chain to Work," Harvard Business
Review, 72 (2), 164-174.
  Delaney, J.T. and Huselid, M.A. (1996), "The Impact of Human Resource Management Practices on Perceptions of Organizational Performance," Academy
of Management Journal, 39 (4), 949-969.
  Schneider, B., Henges, P.J., Smith, D.B. and Salvaggio, A.N. (2003), "Which Comes First: Employee Attitudes or Organizational Financial and Market
Performance?, "Journal of Applied Psychology, 88 (5), 836-851. 4
or indirect, and in terms of the causal direction of the relationship. In
Addition, many of the results are only moderately significant,
suggesting the possibility That additional concepts are likely,
Necessary to understand these relationships.
 
 
Theoretical
Background
In this section, We Will Provide a brief background on the
organizational characteristics under study and Their Expected
influence on employee Attitudes and downstream market and
financial outcomes. We will of address four sets of organizational
characteristics: organizational culture, organizational climate, human
resource systems, and market characteristics. We will from this conclude
section with a brief review of the market and financial outcomes
under study.
 
Organizational Culture:
 
Organizational culture has been defined as the set of shared
Assumptions and beliefs about an organization and its function in the
marketplace2
 or "The Ways of thinking, behaving, and Believing That
members of a social unit have in common "

3
. As Such, culture has
commonly been treated by organizational Researchers as a set of
cognitions shared by members of a social unit.
 
According to these previous Researchers, an organization's culture is
thought to play a key role in strategy formulation, firm performance,
and competitive advantage. Culture May Also have indirect effects
on performance in benefiting other aspects of an organization. For
example, researchers
4
 have found is That organizational culture
linked to service quality and employee performance, both of the which
have been Identified as the fundamental links in Harvard's Service Profit
Chain leading to subsequent consumer and financial success
indicators.
 
The current study utilizes Cooke and Rousseau's (1988) cultural
the which the model identifies four different cultural types found in
organizations: Cooperative, Competitive, Passive, and Aggressive.
We will of EACH type the address in turn.
 
Cooperative Culture. Members of organizations with cooperative
Cultures are encouraged to set goals, take initiative, and work
together to attain personal and organization objectives. Cooperative
styles imply a high valuation on individuals and are expected to be
associated with decision authority and Greater Greater confidence
That the notes will from distributed authority be abused. Cooperative norms
Such behaviors as goals encourage Attainment, enjoying one's work,
and maintaining one's personal integrity and standards.
 
                                                 
2
 Barney, J.B. (1986), "Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?," Academy of Management Review, 11 (3), 656 -
665.

3
 Cooke, R.A. and Rousseau, D.M. (1988), "Behavioral norms and Expectations: A Quantitative Approach to the Assessment of Organizational Culture,"
Group & Organization Studies, 13 (3), 245-273.

4
 Klein, U. S., Masi, R.J., and Weidner, C.K. (1995), "Organization Culture, Distribution and Amount of Control, and Perceptions of Quality: An Empirical
Study of linkages, "Group & Organization Management, 20 (2), 122-148. 5
 
Competitive Culture. In organizations with competitive cultural
norms, members are typically rewarded for taking charge and being
in control. In Such organizations, winning is highly valued and Often
members are rewarded for out-performing EACH other. Such an
approach has been Used effectively in designing the sales force
incentives and other compensation schemes. A competitive culture
encourages decisiveness, rewards achievement, and creates an
environment of high expectations. On the other hand, an overly
competitive culture cans inhibit effectiveness by reducing cooperation
and promoting unrealistic standards of performance.
 
Passive Culture. In a passive culture organizations Nowhere
dominates, conflicts are avoided and members feel as if They must
agree with, gain the approval of, and be liked by others. Such
organizations tend to be conservative, traditional, and
bureaucratically controlled, Nowhere members are expected to follow
The Rules and make a good impression. This type of work
cans environment limit organizational effectiveness by minimizing
Constructive expression of ideas and opinions, suppressing
innovation, and stifling flexibility.
 
Aggressive Culture. Aggressive norms minimize the influence at lower
levels by emphasizing adherence to directives and authority.
Aggressive norms promote Such behaviors as procrastination,
inflexibly Following rules and procedures, waiting for direction from
superiors before acting, and Could Also cause service quality to
changed from confused with winning power and pointing out the flaws of
others.
 
Organizational Climate:
 
Organizational climate That reflects the way organizations
Their operationalize culture in daily routines and behaviors5
.
Organizational climate represents workers perception of Their
objective work situation, Including the characteristics of the
They work for organizations and the nature of Their relationships with
other people while doing Their job.
 
Issues Regarding communication, the supervisory Interactions, and job
design are key drivers of the climate Within organization.
Communication Within the organization is critical to disseminate
information and create an environment employees feel Nowhere
valued. In Addition, employees' perceptions of supervisory behavior
have considerable impact on Their Work Attitudes. Effective job
design and empowerment enable employees to act on behalf of the
customer, improv decision making, and increase of autonomy, all of
Should the which leads to the Greater job satisfaction.
                                                                                                                                                                                           
5
 Deshpande, R. and Webster, F.E. (1989), "Organizational Culture and Marketing: Defining the Research Agenda," Journal of Marketing, 53 (1), 3-15.
6
 Huselid, M.A. (1995), "The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance," Academy
of Management Journal, 38 (3), 635-672.
7
 Reichheld, F.F. (1996), The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value, Boston, MA: Harvard Business School Press. 6
 
Human Resource Systems:
 
Key managerial systems Identified in previous research include
selection, development, performance management, and
Compensation systems6
. In drawing prospective employees to fit the
organization's strategies, successful managers select based on HiRes
those traits. Further Training and development enhances the
development of those skills and the acquisition of new, trainable
skills. Human resource initiatives aimed at Providing employees with
The Necessary skills and tools to deliver customer value can not be
viewed as costs, but rather must be regarded as investments with
high and measurable returns. Previous theory states That Also one of
the primary keys to developing a strong organization lies in the way
employees are compensated and rewarded. For example, Pls
Compensation systems are keyed to market driven indicators,
Appropriate behavior is reinforced.
 
Market Characteristics:
 
It stands to reason That May perform certain market characteristics influence
Attitudes employee, as well as customer and financial outcomes. In
particular, the organization's size (in terms of number of employees),
The size of the market in the which the organization operates, and the
competitive environment, are all factors cans That Potentially impact
the concepts under study.
 
Market Outcomes:
 
Higher levels of customer satisfaction have been found to lead to
higher levels of customer retention and loyalty7
, And products and
Services That Provide High satisfaction have a higher Proportion of
repeat business and higher gross margins, in Addition to reduced
Increased acquisition costs and long term REVENUES. It is for these
Reasons That studying customer satisfaction as an outcome measure
of an organization's internal activities is justified.
 
In Addition to customer satisfaction, customer another That response
is of distinct interest is frequency of purchase and use in the product
category. It is typically hypothesized That those customers use the WHO
more of your product or service are more likely, to continue to do so
in the future. Improvements in customer usage Should then result in
improved financial performance.
 
Financial Outcomes:
 
Efforts to improv the organization and its products or services entail
That costs are not reflected in improvements or increases in revenue
customer retention. Therefore, to truly understand the financial
ramifications of an organization's market-based Efforts, these costs
must be accounted for. Such costs cans be accounted for directly or
by utilizing a financial measure That accounts for both revenue and
cost, Such as profitability.

   7
 
Summary:
 
This current Forum for People Performance study is an attempt to
add to the Compelling evidence of these previous studies by
specifically inquiring about a number of organizations' employee
Attitudes and Linking Them with Their organizational culture and
climate, human resource systems, market characteristics, and Their
market and financial performance.
 
 


Methodology
 
There are two broad approaches to organizational studies - one cans
Sample Within organizations across industries or industries. There
Some problems are mixing with organizations across industries,
Including the difficulty in constructing items to measure the Same
concept in different contexts. In Addition, while the heterogeneity
obtained by sampling organizations from a variety of industries
Provides valued generality, Also it creates unwanted noise in the
Data That May Obscure the effects one is searching for. Thus, for this
We selected the research Within the industry approach to maximize item
interpretability across organizations, as well as to Avoid Some of the
undesired effects of organizational heterogeneity.
 
All of the organizations selected for study are involved in the U.S.
media industry. In seeking to obtain as representative a sample of
organizations as possible, One Hundred organizations selected were the resource persons
from the media universe in the United States in a stratified random
sampling procedure. The universe, representing approximately
1.500 organizations, was divided into six strata based on market
size, region of the country, and organizational size. The stratification
That confidence increases this sample of organizations generalizes to
the industry level, and the homogeneous sample Provides a viable
context for understanding the nature of the conceptual relationships
under study.
 
All research instruments, with the exception of financial performance
data, were the resource-based survey. All analysis conducted on the data
involved OLS regression performed in multiple stages. All data was
aggregated to the organizational level for analysis.
 
 
RESPONDENTS AND
Measures
Within EACH of the 100 organizations selected for this study, a project
Identified as our manager was key research contacts. This project
manager worked with the research team to identify the managerial
teams and individual employees Necessary for completing the survey
instruments for the study.
 
Employee Satisfaction and Engagement:
 
Regarding measures employee satisfaction and engagement were the resource persons
drawn from the Organizational Effectiveness Inventory8
 (Oei) and
                                                 
8
 Organizational Effectiveness Inventory is a trademark of Human Synergistics / Center for Applied Research International. The Inventory
and supporting materials are Copyrighted © 2000 by Human Synergistics / Center for Applied Research, Inc.. 8
5.568 employees were the resource completed by respondents representing 90 of
the 100 organizations in the overall sample. The project manager at
EACH organization was utilized in identifying employee respondents
and ensuring the completion of the surveys. Respondents were the resource persons
randomly selected from the key operational areas of the organization
(Eg, product development, operations, marketing, and
administration). The number of respondents from EACH area of the
organization was proportional to the size of That area relative to the
rest of the organization, and sampling from EACH organization was
proportional to the size of the organization relative to the other
organizations in the sample. This purposive and proportional
sampling technique resulted in the number of sampled employees
ranging from 15 to 344 (mean = 59.5).
 
The scales for employee satisfaction to employee Relate
Perspectives for the Following dimensions: stress, job satisfaction,
and quality of service. Stress refers to the extent to the which people feel
They are being Pushed beyond normal Their range of comfort by
organizational demands, pressures, or conflicts. Job satisfaction
covers issues related to the extent to the which members report positive
Their appraisals of work situation. Quality of service refers to the
extent to the which members believe They Are Responsible for identifying
and satisfying the needs of customers.
 
The scales for employee engagement to employee Relate
Perspectives on the Following dimensions: inspiration, personal
involvement, and supportiveness. Inspiration refers to the extent to
Within the which forces on organizational members and lead to Them
Ways behave in consistent with organizational goals Attainment.
Personal involvement is focused on the extent to the which people at all
levels Participate actively in shaping the organization and Helping it
to Achieve its mission. Supportiveness covers issues related to the
extent to the which managers are personally supportive and considerate
of Their direct reports.
 
Organizational Culture:
 
Organizational culture was measured using the Organizational
Culture Inventory9
 (OCI), the which was completed by the Same 5.568
employees representing 90 of the organizations in the overalls
sample. The OCI is a 120-item, 12-factor scale Designed to measure
the individual respondents's perceptions of his or her organization's
culture. The OCI Assesses the Ways in the which organizational
members are expected to think and behave in relation both to Their
tasks and to other people.
 
Organizational Climate:
 
Organizational routines were the resource persons using the Oei measured as described
                                                                                                                                                                                          
9
 Organizational Culture Inventory is a trademark of Human Synergistics International. The Inventory and supporting materials are
Copyrighted © 1989 by Human Synergistics, Inc..
10
 The People Management Practices Survey is Copyrighted © 2000 by Roberts, Nathanson, and Wolfson LLP.
   9
above. In Addition to measuring employee Attitudes, the Oei is
Designed to measure an individual's perceptions of respondents
Various managerial practices and operationalizations of an
organization's culture. This inventory was completed by the Same set
That of 5.568 employees completed the Organizational Culture
Inventory (OCI). The particular scales as measures for selected
organizational routines in this particular study include job design,
communication, managerial and facilitation.
 
Human Resource Systems:
 
The People Management Practices10
 Designed to collect the survey was
information on the department level Within the managerial practices
organization. In total, 269 groups of senior managers representing
83 of the organizations involved in the study completed the survey
as a group. We were the resource persons Concerned not with individual perceptions of
managerial practices, but rather with departmental-level views
Regarding these practices, so this method of completing the survey
Seems Appropriate. The survey consisted of 76 items covering the
four factors of selection, development, performance management,
and compensation.
 
Market Characteristics:
 
Size of the organization and its market, as well as the level of
competition, were the resource incorporated into the models as control variables.
Several variables were the resource persons collected to measure the size of the
Including organization unit sales, revenue, and total number of
employees, and number of households in the organization's
geographic market was Used to measure market size. For the level of
competition, a variable representing the number of direct competitors
was selected. All of this data was available from an independent
source for this industry.
 
Customer Outcomes:
 
A total of 110 000 surveys, with three dollar bills attached, were the resource persons
mailed to prospective respondents in the 100 markets involved in the
study. A total of 37.036 customers completed the survey, resulting in
approximately a 34% response rate, with the number of respondents
per market ranging from 271 to 472 (mean = 366.7). These
respondents completed an 88-item survey measuring a number of
factors related to media use and sources of entertainment and
information. A number of variables derived from this were the resource persons
information, from the which two were the resource persons selected for utilization in this study
- A frequency of purchase index to measure customer behavior and
a customer satisfaction index.
 
To test for non-response bias, We followed up the mail survey with a
telephone survey of 2.000 non-responders. These non-responders
completed a condensed version of the mail survey covering the key
customer variables derived in preliminary analysis. Minimal
Between Identified significant differences were the resource persons and non-responders
responders, and no significant differences found for the 10 were the resource persons
frequency of purchase index and customer satisfaction index
employed in the present study.
 
Financial Outcomes:
 
As referenced Earlier, profitability is a crucial financial outcomes for
understanding the value provided by the constructs under study in
this model. It is Presumed That Efforts to improv employee Attitudes
and enact behaviors valued Within the organization entail costs, and
profitability, as opposed to revenue or customer loyalty measures,
Such costs takes into account direct. The sample of 100
organizations participating in this study included both private and
public organizations. Therefore, publicly available data on financial
performance were the resource not available for all organizations, and for those
public organizations in the sample, a number were the resource part of larger
That the media conglomerates do not break out performance data by
sub-units. However, there are third party organizations collect That
Such information Annually to Provide participating organizations with
information on industry norms for items like revenue, expenses,
staffing, and capital investments. It was from this information That We
drew our measure for profitability. Thus, the financial data reported in
this study was provided to a third party outside of any direct
involvement in our research, and was derived directly from financial
reports for these organizations. In total, the financial data was available
for 90 of the 100 organizations in our sample.
 
 
RESEARCH QUESTIONS The present research study will of the interrelationship Between
employee satisfaction and employee engagement, the antecedent
organizational characteristics for these two employee Attitudes, and
Their downstream market and financial consequences. We address
three classes of structural questions: first, do employee satisfaction
and employee engagement have unique antecedents; second, does
EACH have an impact on subsequent market and / or financial
outcomes; and third, the effects are direct or indirect in Their impact
on the outcome variables.
  
RESULTS 1. Do Employee Satisfaction and Employee Engagement have
unique organizational antecedents?
 
Yes, Employee Satisfaction and Employee Engagement Do
indeed have different organizational predictors. The analysis
conducted and the results are discussed below.
 
As mentioned above, the organizational characteristics under
study included four cultural types (Cooperative, Competitive,
Passive, and Aggressive), 3 climate measures (Communication,
Managerial Facilitation, and Job Design), 4 human resources
systems (Selection, Development, Performance Management, &
Compensation), and 3 market characteristic measures
(Organization Size, Market Size, Market & Competition).
 
The key organizational characteristic for explaining employee
Satisfaction was the Organizational Communication, a measure of 11
organizational climate. Organizational Communication represents
a measure of the downward communication in the organization,
ie, the effectiveness with the which information about the
organization is sent and received by employees, and the upward
communication in the organization, ie, the effectiveness with
the which information is sent from employees to people in higher
level positions. The analysis in this study shows That
Organizational Communication accounts for 45% of the variance
in Employee Satisfaction (R2
= 0449), while none of the other 13
organizational characteristics under study were the resource persons found to have a
significant impact on Employee Satisfaction.
 
Table 1 - Employee Satisfaction
R2
= 0449
Variable Std. Estimate (β) P-Value
Organizational Communication 0670 p <.001
 
 
For Employee Engagement, there were the resource persons installments organizational
characteristics found to be significant antecedents in the
analysis. One of the Key Findings here Is That Employee
Satisfaction is indeed a significant antecedent to Employee
Engagement, in Addition to Managerial Facilitation and Job
Design (Organizational Climate) and all four cultural types
(Cooperative, Competitive, Passive, and Aggressive). Together
these seven variables accounted for 88% of the variance in Employee
Engagement (R2
= 0884). Employee Satisfaction, Managerial
Facilitation, Job Design, Culture Cooperative, and Competitive
Culture all positive predictors were the resource persons, while Passive Culture and
Aggressive Culture negative predictors were the resource persons.
 
Table 2 - Employee Engagement
R2
= 0884
Variable Std. Estimate (β) P-Value
Employee Satisfaction 0107 p <.05
Managerial Facilitation 0456 p <.001
Job Design 0210 p <.001
Constructive Culture 0239 p <.001
Competitive Culture 0168 p <.01
Passive Culture -0159 p <.01
Aggressive Culture -0171 p <.01
 
    
Interpreting these results, to Achieve a motivated workforce,
organizational managers must first Ensure That Their employees
are satisfied, and one of the keys to creating a satisfied
workforce is the development of an effective communication
environment, both up and down the organization. Further means
of Motivating employees come from the Interaction Between
managers and employees with regards to supportiveness and the
extent to the which managers establish and Communicate
expectations for performance. In Addition, employees are more
Pls motivated Their job is effectively Designed in terms of
autonomy and clearly defined roles. 12
 
Turning to the Organizational Culture, the cultural type best suited to
creating a motivated workforce is a solid mix of Cooperative and
Competitive, Passive and Aggressive with cultural norms
dampening engagement. The takeaway here is That employees
must be expected to cooperate and work together, but They must
Also be expected to take charge and fight Pls Necessary. The
espoused competition here is healthy competition - finding the
best solution to a problem by presenting and Evaluating
competing alternatives. A cooperative culture Might only be more
apt to reach consensus on a single option rather Than pitting
multiple choices against one another in an effort to develop an
optimal solution. This, however, does not imply aggressive
Such techniques as attacking competitive alternatives.
 
Somewhat surprisingly, none of the Human Resource Systems
Either were the resource persons found to influence employee engagement or
Employee Satisfaction. This is not to say That Such systems do
not impact other employees or other organizational Attitudes
factors, but rather That They do not directly effect the two
Attitudes employee analyzed in the present study.
 
2. Do Employee Satisfaction and Employee Engagement EACH
have an impact on subsequent market and / or financial
outcomes?
 
Yes. Employee Satisfaction has a direct impact on the positive
Customer Satisfaction, Employee Engagement while loop has an
indirect effect on Customer Satisfaction through two intervening
Mechanisms: 1) employee engagement has a direct and positive
influence on an organization's level of market orientation11
 (A set of
of market-related organizational behaviors comprised of
customer focus, coordination, and market focus) and 2) through
its direct effect on market orientation, employee engagement has
an indirect effect on Customer Behavior, the which in turn directly
Influences Customer Satisfaction.
 
Table 3 - Customer Satisfaction
R2
= 0218
Variable Std. Estimate (β) P-Value
Employee Satisfaction 0312 p <.01
Customer Behavior 0294 p <.01
 
Table 4 - Customer Behavior
R2
= 0121
Variable Std. Estimate (β) P-Value
Market Orientation 0347 p <.001
 
Continuing with the outcomes analysis, Customer Satisfaction
Influences directly Financial Performance, in this case
                                                 
11
 Further information on market orientation is available from the authors upon request. Detailed discussion of this concept is beyond the scope of the
present summary. 13
represented by profitability. The Effects of Employee Satisfaction
Employee Engagement and Financial Performance acres on
indirect through Their Impact on Customer Satisfaction.
 
Table 5 - Financial Performance
R2
= 0:08
Variable Std. Estimate (β) P-Value
Customer Satisfaction 0280 p <.01
 
A Closer look at Tables 3-5 indicates that, in contrast to Tables 1 -
2, the R2
 values are not particularly high. Two factors are at work
in interpreting this result: 1) the data for market and financial
outcomes were the resource persons collected from sources independent of those
Providing data on employee Attitudes, Hence any lowering effects
of the method or response bias and 2) in determining customer
satisfaction and profitability, there are many more variables at
Than just work the employee Attitudes in the which this research was
Interested. The fact That We see significant results at all indicates
The importance of these Findings and Their implications for
managers.
 
3. Are the Effects of Employee Satisfaction and Employee
Engagement on Their subsequent market and financial
direct or indirect outcomes?
 
As discussed in the results for # 2 above, Employee Satisfaction
and employee engagement have both direct and indirect effects
on subsequent market and financial outcomes. Employee
Influences directly Satisfaction Customer Satisfaction, while
Employee Engagement's effects are on Customer Satisfaction
indirect through market orientation and Customer Behavior.
Through Their direct and indirect impact on Customer
Satisfaction, Employee Satisfaction and Employee Engagement
Positively influences Financial Performance.
 
 
CONCLUSIONS AND
NEXT STEPS
What is clear from this research Is That Employee Satisfaction and
Employee Engagement Attitudes are Important for managers to
EACH They understand as a critical influence market outcomes directly
and, in turn, indirectly influence an organization's financial
performance. Organizations with engaged employees have customers
Their use WHO customers more products, and Increased Customer
usage leads to higher levels of customer satisfaction. In Addition,
satisfied employees see positive Their Attitudes Transferred directly to
satisfied customers. It is an organization's employees WHO influence
The Behavior and Attitudes of customers, and it is these customers
WHO drive an organization through the purchase and use of its
products. Without customers, an organization ceases to exist. And,
the proper target on the which employees Should focus is customers -
employees have a direct effect on customer Attitudes and behaviors,
and Hence, this is WHERE the energy of an organization's employees
Should Be directed.
   14
It pays to make special note of the role Played by the customer in
determining the financial performance of an organization. While it is
Easier to measure and understand financial objective numbers,
Financial those numbers are driven by the actions of an
organization's customers. And, customers are more satisfied WHO
with an organization's products are less expensive to serve, and,
Hence, more profitable customers. Therefore, one of the key
implications of this research Is That a focus on customer response is
a worthwhile Endeavor in its own right.
 
One of the key organizational characteristics in determining
Employee Satisfaction and Employee Engagement was
organizational culture. With the above discussion highlighting the
prominent role employees' play in driving customer and Attitudes
behavior, an organizational environment employees are given Nowhere
a voice Should Be highly valued. Customers need a voice Within the
organization, and it requires Some measure of intensity to make That
Voice Heard. An environment Nowhere individuals and teams are
competing to be winners cans work to the advantage of both the
organization and its customers if the goals are in line with developing
behaviors oriented to the market and to customers, Such competition
to implement the "best" behaviors, products, and ideas have earnest
positive results. May seem unhealthy competition though in an ideal
setting, the internal competition cans be very healthy for an organization -
Such a premise has driven many compensation schemes, especially
for sales positions, for hundreds of years. If the competition is
directed to the Appropriate outcomes, eg, the delivering of service
quality to customers, Should Such competition leads to positive
results. An Aggressive Culture, on the other hand, was not found to
have the Same type of positive influence. Rather, this cultural type,
the which represents an environment Rife with confrontation and
perfectionism, tended to consistently have a negative influence on
Attitudes employee.
 
Other key organizational factors Identified in this research include
Played by the key role in driving organizational communication
Employee Satisfaction, and the role Played by managerial facilitation
and job design in driving employee engagement. As mentioned in
The Results # 1 above, it was surprising to find That none of the four
human resource systems (selection, development, performance
management, and compensation) were the resource persons found to directly influence
Employee satisfaction or employee engagement. Further research
is needed to identify what areas of the organization are impacted by
these human resource systems.
 
     15
 
 
CONTACT
INFORMATION
For more information about these or for information Research Findings
about the Forum for People Performance Management and
Measurement, contact:
 
Charles A. Cozzani
Executive Director
Forum for People Performance Management and Measurement
Department of Integrated Marketing Communications
Northwestern University
1870 Campus Drive, 3rd Floor
Evanston, IL 60208
c-cozzani@northwestern.edu
630.750.4214
978.389.8362 - eFax
 
or
 
Dr. James L. Oakley
Assistant Professor of Marketing
Krannert School of Management
Purdue University
Rawls Hall, 100 S. Grant St.
West Lafayette, IN 47907
joakley@krannert.purdue.edu
765.494.4445
765.496.7434 - fax
 

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