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International Journal of Organization Theory & Behavior
Show me the money: Toward an economic model for a cost-benefit analysis of
employee engagement interventions
Marcus Mueller,
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Marcus Mueller, (2019) "Show me the money: Toward an economic model for a cost-benefit analysis
of employee engagement interventions", International Journal of Organization Theory & Behavior, Vol.
22 Issue: 1, pp.43-64, https://doi.org/10.1108/IJOTB-05-2018-0056
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Show me the money
Toward an economic model for a cost-benefit
analysis of employee engagement interventions
Marcus Mueller
Sacred Heart University Luxembourg, Luxembourg City, Luxembourg
Abstract
Purpose –The purpose of this paper is to reconcile various theoretical directions in employee engagement
with self-determination theory (SDT) as a unifying framework and introduce an inter-disciplinary employee
engagement economics model based on SDT.
Design/methodology/approach –Two studies were conducted applying a T1/T2 intervention study
design. Study 1 examined the causal relationship between an organizational intervention and employee
engagement with n¼367 employees from a European pharmaceuticals company using both survey and
actual performance data. Study 1 results were used as input data for study 2 which tested the employee
engagement economics model by calculating the pre-/post-economic value added and return on investment
(ROI) for the intervention.
Findings –Study 1 results showed a significant positive impact of the SDT-based intervention on both
self-reported and actual employee engagement. Study 2 converted study findings into pre-/post-economic
considerations putting an economic dollar value on achieved employee engagement gains and calculating an
ROI in relation to the cost incurred.
Practical implications –The present results support SDT as a unifying theory for employee engagement
and the proposed employee engagement economics model as strategic decision-making tool for planning and
evaluating the economics of employee engagement interventions.
Social implications –This research supports a shift in corporate focus from “people as cost”to “people as
values”proposing a systematic, value-based, strategic management approach to employee engagement based
on cost-benefit analysis.
Originality/value –This is the first research to contribute an empirical economic model for employee
engagement interventions to literature. It is based on the first reconciliation of engagement literature
identifying SDT as a unifying framework. Finally, for the first time, this work identifies subjective vitality as
a measure for engagement and contributes a definition for disengagement to literature.
Keywords Economics, Motivation, Engagement, Self-determination theory
Paper type Research paper
Introduction
Employee engagement matters, in theory and practice, as reflected by an impressive
rise in academic literature and corporate activity over the last decade (Saks and Gruman,
2014). A substantial amount of research has identified employee engagement as a
way of creating a competitive advantage for companies and improving organizational
performance (Anthony-McMann et al., 2017; Boudreau and Rice, 2015; Christian et al.,
2011; Harter et al., 2002; Jeung, 2011; Macey and Schneider, 2008; Ulrich, 1997). However,
despite all this flurry around employee engagement, little seems to have changed in terms
of employees’actual engagement levels. In his article, Skinner (1981) asked “why do so few
companies make use of the greatest competitive weapon of all, engaged employees?”
(p. 107). Three decades later, Luthans et al. (2007) suggested that organizations did not
understand the value of engaged employees and, therefore, invested neither in employees’
development nor in their management. Such qualitative, scholarly claims received
quantitative support from business practice, for example, the Gallup Organization’sState
of the Global Workplace Survey 2013 found that only 13 percent of employees globally
were engaged, and, in turn 87 percent disengaged (Crabtree, 2013). Recent literature even
suggested that employee engagement was declining, further increasing the “engagement
gap”(Saks and Gruman, 2014, p. 156).
International Journal of
Organization Theory & Behavior
Vol. 22 No. 1, 2019
pp. 43-64
©EmeraldPublishingLimited
1093-4537
DOI 10.1108/IJOTB-05-2018-0056
Received 16 May 2018
Revised 28 August 2018
Accepted 5 September 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1093-4537.htm
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After reviewing the literature, the apparent lack of progress in business practice may be
due to “a large (and continued) discrepancy between corporate interest in employee
engagement and academic research and writing”(Bakker and Schaufeli, 2008, p. 151)
manifesting itself in two main areas. First of all, there is a lack of progress in theory. So far,
research has failed to deliver a conclusive theoretical foundation including a corresponding
measure for employee engagement to be confidently used by researchers and practitioners
(Anthony-McMann et al., 2017; Saks and Gruman, 2014). When applying one of this diverse
set of existing frameworks to research, an over-reliance on cross-sectional, correlational,
self-reported study designs lacking causal conclusions has been highlighted as a further
shortcoming of the scientific work on employee engagement to date (Bailey et al., 2017; Saks
and Gruman, 2014). Second, a senior executive from a large European pharmaceuticals
company recently commented to the researcher: “How do you expect our executive team to
approve the investment in an employee engagement program without an idea of related
financial benefits? Show me the money!”Academic scholars have not been able to
demonstrate how employee engagement produces effects of concern to company executives
(Macey and Schneider, 2008). The field of employee engagement is suffering from a lack of
an economic conceptualization, for example, capturing the potential and actual value
creation of employee engagement from a cost-benefit perspective instead of looking at
people from a mere cost, expense, or “cut-cut-cut”point of view (Cappelli, 2015; Naznin and
Hussain, 2016).
In summary, literature on employee engagement has highlighted three main obstacles to
theoretical and practical developments in the field, that is a lack of a conclusive theoretical
foundation, a corresponding theoretically grounded measure, and a translation into an
economic conceptualization.
In response to the above shortcomings in literature, this paper is structured into the
following parts. After a review of literature, self-determination theory (SDT) is suggested as
a unifying theory for employee engagement including subjective vitality as an SDT-based
measure for employee engagement. Subsequently, the economic value added (EVA) model is
introduced as an economic tool for performing a cost-benefit analysis of organizational
interventions to increase employee engagement. In study 1, an SDT-based, pre-post research
design with self-reported as well as actual performance data was applied to identify
causal relationships of an organizational intervention program on employee engagement.
In study 2, the results from study 1served as input variables to test the EVA model as an
executive decision-making tool for planning and evaluating the economics of employee
engagement interventions. In terms of the engagement terminology used in this paper,
Schaufeli (2013) distinguishes between employee engagement and work engagement. This
paper prefers employee engagement over work engagement implying an investigation into
an organizational instead of task-specific context.
Review of literature
The theory of employee engagement –evolution or illusion?
Over the past decade, employee engagement has received an explosion-like increase in
attention by academic scholars and the business community. Saks and Gruman (2014) note
that the initial theoretical contribution to the field of employee engagement by Kahn (1990)
had been hardly cited during the first 20 years after publication, however, had over 1,800
citations from 2010 to 2014. The author’s own search on Google Scholar returned over 2,000
citations of Kahn’s (1990) contribution since 2015.
The rapid development of literature in the field of employee engagement has led to a series
of partially competing and in parts overlapping conceptualizations for employee engagement
leading “parallel lives”(Keenoy, 2014, p. 197). For example, the most widely used practitioner
definition is based upon the Gallup framework (The Gallup Organization, 1992–1999)
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proposing engagement as an “individual’s involvement and satisfaction with as well as
enthusiasm for work”(Harter et al., 2002, p. 269). From a scholarly perspective, at least eight
distinct conceptual frameworks for employee engagement can be distinguished.
Kahn (1990) suggested that employee engagement was a motivational construct with three
energetic components (physical, emotional and cognitive) by which employees invested their
selves in their work roles. Even though Rothbard (2001) followed Kahn’s (1990) general
theoretical direction suggesting employee engagement as “one’s psychological presence in or
focus on role activities”(p. 656), her framework included only two dimensions, absorption, the
level of a person’s immersion, and attention, the psychic energy invested at work. Rothbard’s
(2001) contribution was later amended by Rich et al. (2010) proposing a dimensional hybrid
framework combining Kahn’s (1990) and Rothbard’s (2001) work by suggesting absorption
and attention as subcomponents of cognitive engagement.
A second stream of conceptualizations of employee engagement grew out of the
literature on burnout. In their seminal definition of burnout as a three dimensional construct
of exhaustion, cynicysm and ineffectiveness, Maslach and Leiter (1997) defined employee
engagement as the opposite to burnout determined by three opposite components, namely,
vigor, involvement and efficacy. Schaufeli et al. (2002) based their theory of engagement on
Maslach and Leiter’s (1997) proposal of employee engagement and burnout as two opposite
ends of a continuum when they proposed vigor, dedication and absorption as the three
dimensions of engagement.
When Saks (2006) introduced the cognitive, emotional and behavioral pillars of employee
engagement, he based his work on Kahn’s (1990) original definition, however, also
suggested that employee engagement could be grounded in social exchange theory,
following Robinson et al. (2004) definition of engagement as a “two-way relationship
between the employer and the employee”(Saks, 2006, p. 603). Macey and Schneider (2008)
postulated an alternative three dimensional construct for employee engagement, also based
on Kahn’s (1990) work. They suggested that employee engagement included “involvement,
commitment, passion, enthusiasm, focused effort and energy”(p. 4) leading to a hierarchical,
three-step model of trait engagement, state engagement and behavioral engagement,
building on each other. More recently, Saks and Gruman (2014) contributed a further
extension of Kahn’s (1990) work by differentiating employee engagement into task
engagement, team engagement and organizational engagement.
Table I summarizes the theoretical developments. It shows that despite such theoretical
variety, all conceptualizations seem to agree that, at its core, employee engagement
represents a contribution of multi-dimensional energy to organizational contexts.
Taking the above parallel evolutionary stages of the field of employee engagement into
consideration, academic researchers and practitioners have an extensive menu of theoretical
frameworks and dimensions to choose from. Scholarly and organizational decision-making
processes have been further challenged by claims that the hype around engagement was a
“fake debate”on a construct that was nothing but a “facelift”of what research already knew
and a scholarly contest over how to measure engagement. With regards to the seminal “fake
debate”over theoretical overlaps with similar constructs, employee engagement has been
proposed, as a potential re-packaging of already existing concepts such as job satisfaction,
organizational commitment or job involvement ( for review Shuck et al., 2013). To date,
“scholars continue to confirm both the construct validity and the uniqueness of (employee)
engagement in comparison to other better-known job-related constructs as its utility as a
measurable organizational outcome will continue to increase”(Anthony-McMann et al.,
2017, p. 191; Christian et al., 2011).
A meta-review of scientific studies on the antecedents (155 studies) and outcomes
(42 studies) of employee engagement found individual psychological states, experienced
job-design-related factors, perceived leadership and management, individual perceptions of
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organizational and team factors, and organizational interventions or activities as the
main antecedents of employee engagement (Bailey et al., 2017). Bailey et al.’s (2017) study
further summarized employee engagement’s positive links to outcomes into organizational
indicators, such as team performance, customer loyalty and quality of care; individual level
outcomes including in-role task performance, extra-role performance (e.g. organizational
citizenship behavior); and morale. These scientific findings are consistent with practitioner
research linking employee engagement to business results such as higher productivity,
higher profitability, lower absenteeism, lower employee turnover, fewer accidents, higher
quality/fewer defect, as identified by practitioner research (Harter et al., 2002; The Gallup
Organization, 1992–1999).
However, despite such insights into employee engagement, the validity of research
findings is still being questioned by some academic scholars (Anthony-McMann et al., 2017;
Saks and Gruman, 2014). Both researchers and practitioners are challenged by the theoretical
diversity of frameworks. Unless there is clarity on the concept and a clear link between
framework and measurement, the key concern remains: what is actually being measured?
The measurement of employee engagement
Anthony-McMann et al. (2017) “contend that (employee engagement’s) ‘parallel lives’are leading
to an increased risk that the meaning of engagement is becoming elusive”(p. 164) and that
clarity on measurement will play a critical role for the development of the field. The author’s
search for literature on employee engagement measurement scales yielded thirteen results.
The Utrecht Work Engagement Scale (Schaufeli et al., 2002, 2006) with its subscales of
vigor, dedication and absorption, is the most frequently used scale in academic research.
However, there have been substantial uncertainties over its construct and discriminant
validity. There are concerns over the scale’s three factors being too overlapping as well as
its independence from burnout and job satisfaction (Saks and Gruman, 2014). Similar
questions have been voiced over Gallup’s Workplace Audit scale (GWA or Q12; Harter et al.,
2002; The Gallup Organization, 1992–1999), the dominating assessment tool in practice,
in terms of measuring job satisfaction instead of employee engagement.
Author(s) Theoretical foundation Dimensions Manifestation descriptives
Kahn (1990) Physical, emotional, cognitive “Physical, emotional, and
cognitive energies”(p. 693)
Maslach and
Leiter (1997)
Vigor, involvement, efficacy “High level of activation and
pleasure”(p. 417)
Rothbard (2001) Kahn (1990) Absorption, attention “Immersion and psychic
energy”(p. 655)
Harter et al. (2002) The Gallup Organization
(1992-1999)
Attitude, antecendents of
attitude
“Emotionally connected and
cognitively vigilant”(p. 269)
Schaufeli et al.
(2002)
Maslach and Leiter (1997) Vigor, dedication, absorption “Energetic connection with
work”(p. 73)
Saks (2006) Kahn (1990), Social
Exchange Theory,
Robinson et al. (2004)
Physical, emotional, cognitive
(job vs organizational)
“Investment of cognitive,
emotional, and physical
resources”(p. 603)
Macey and
Schneider (2008)
Kahn (1990) Trait, state, behavioral “Passion, enthusiasm, focused
effort and energy”(p. 4)
Rich et al. (2010) Kahn (1990) Physical, emotional, cognitive
(cognitive ¼absorption and
attention)
“Physical, cognitive and
emotional energies”(p. 618)
Saks and Gruman
(2014)
Kahn (1990) Task, team, organizational “Physical, cognitive, and
emotional energies”(p. 172)
Table I.
Summary of
theoretical
developments in
the field of employee
engagement
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The burnout anti-thesis postulate provides the foundation of employee engagement
measures such as the Maslach Burnout Inventory (Maslach and Jackson, 1981)
as well as the Oldenburg Burnout Inventory (Demerouti and Bakker, 2008). Most other
scale developments were based on Kahn’s (1990) conceptualization. These scales include, for
example, Rothbard (2001) with subscales of attention and absorption, May et al. (2004)
distinguishing between cognitive, emotional and physical engagement, Saks (2006)
measuring job engagement vs organizational engagement, Rich et al. (2010) (cognitive,
emotional and physical engagement), Soane et al.’s (2012) ISA scale (intellectual, social and
affective engagement), Stumpf et al. (2013) ( felt and behavioral engagement), Costa et al.
(2014) (team work engagement), Barrick et al. (2015) collective organizational engagement
and Shuck et al.’s (2016) Employee Engagement Scale (EES) with subscales of cognitive,
emotional and behavioral engagement.
The author’s review shows an acceleration in EES developments in recent years.
Astonishingly, none of the examined scales seemed to focus on and measure the constituent,
conceptual parts that all investigated frameworks in Table I seemed to have in common,
multi-dimensional energy levels. In conclusion, it is not surprising that some academic
scholars continue to critique a lack of theoretical links between employee engagement
measures and conceptualizations, in turn, questioning the research results associated with
the above scales (Anthony-McMann et al., 2017; Jeung, 2011; Macey and Schneider, 2008;
Saks and Gruman, 2014).
In summary, the author’s review identified at least 2 foundational directions (Kahn, 1990;
Maslach and Leiter, 1997), 9 conceptual frameworks and 13 measurement tools for employee
engagement. In addition, scholarly activity has been criticized for a lack of studies
investigating causal relationships, using pre-post designs and actual performance data.
Macey and Schneider (2008) make the point that not even a definition for “disengagement”
had been established in literature. The field seems to have entered a dead end road
(Saks and Gruman, 2014). Christian et al.’s (2011) contribution based on their meta-review
could provide a way out of the apparent dilemma. Following LePine et al.’s (2002) work,
Christian et al. (2011) suggest employee engagement as a higher-order construct integrating
its various proposed dimensions as theoretical properties.
Re-framing employee engagement
Meyer and Gagné (2008) postulate that “what appears to be missing is a strong unifying
theory ( for employee engagement) to guide research and practice”(p. 60). They move on to
extend Macey and Schneider’s (2008) work by grounding employee engagement in SDT.
SDT has an over 40 year scientific track record. SDT studies have applied a full range of
research designs including experimental settings to examine causality, cross-sectional and
longitudinal studies as well as training, development and intervention studies in various
domains including organizations (see Mueller and Lovell, 2015 for review).
The variety of multi-dimensional conceptualizations on employee engagement seems to be
well captured by SDT’staxonomyofmotivation.SDTfoundersDeciandRyan(1985),Ryanand
Deci (2000) propose motivation as a continuum of multiple forms of motivation, from intrinsic
motivation, performing a task for its own sake, viaextrinsicmotivation,actingoutofanexternal
stimulus such as carrot or stick, to amotivation, a complete lack of motivation (see Figure 1).
Macey and Schneider (2008) suggest that the construct of engagement is distinct from
motivation. From an SDT perspective, Meyer and Gagné (2008) propose substantial
overlaps between levels of employee engagement and SDT’s motivational continuum.
In conclusion, higher levels of employee engagement correspond to higher levels of
autonomous motivation. In turn, lower levels of autonomous motivation, namely, controlled
motivation and amotivation, overlap with lower levels of employee engagement, which can
also be referred to as disengagement.
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SDT further proposes that the underlying mechanism determining the form of motivation is
the satisfaction of three basic psychological needs. The more people feel their needs for
autonomy, competence and relatedness are met, the more they will perform an activity out
of an internal stimulus, that is autonomously motivated (Deci and Ryan, 2008; Ryan and
Deci, 2000). The level of an individual’s basic psychological need satisfaction depends on
two factors, environmental circumstances and the individual’s perception of these
contextual factors. In the context of organizations, SDT research has established a long list
of studies showing how autonomous motivation was related to organizational outcomes
such as performance (Baard et al., 2004; Gillet et al., 2013), creativity (Grant and Berry, 2011),
quality (Blais and Briere, 1992), goal attainment (Sheldon and Elliot, 1998), persistence
(Koestner and Zuckerman, 1994), organizational citizenship behavior, prosocial behavior,
physical and psychological health and well-being (Gagné and Deci, 2005). Conversely, lower
levels of basic psychological need satisfaction, resulting in controlled motivation and
amotivation, were not only associated with lower levels of positive outcomes but have also
been found to cause substantial detrimental behavior such as the seeking of short-term
benefits accompanied by long-term costs, impulsive temptations, impaired logical
reasoning, cognitive impairment, foolish and disproportional risk-taking, inappropriate
and risky goals beyond performance and capability, violation of rules and guidelines,
procrastination, reduced stamina, arrogance, egotism, disclosure of confidential information,
lethargy and aggression (Mueller and Lovell, 2015).
Applying the SDT approach to the field of employee engagement could also help to solve
the challenges related to measurement. Subjective vitality is a concept grounded in SDT,
defined as a positive sense of being alive and full of energy (Ryan and Frederick, 1997),
which shows extensive conceptual overlaps with the multi-dimensional energy definitions
of employee engagement frameworks in Table I. The satisfaction levels of the basic
psychological needs of autonomy, competence and relatedness are positively related to
subjective vitality and mediate the impact of work factors on subjective vitality (van den
Broeck et al., 2008). The benefit of subjective vitality being grounded in SDT is that the
levels of subjective vitality correspond to the levels of SDT’s continuum of motivation.
In conclusion, if both levels of employee engagement and subjective vitality correspond to
SDT’s continuum of motivation, then employee engagement and subjective vitality overlap.
Therefore, the subjective vitality scale (SVS; Bostic et al., 2000; Ryan and Frederick, 1997)
is proposed as an appropriate measurement scale for employee engagement. Based on
SDT’s continuum of motivation and the construct of subjective vitality, the author defines
disengagement as performing work roles due to an external perceived locus of causality
resulting in reduced levels of physical and psychological energies.
Amotivation
External
Regulation
Extrinsic Motivation
Controlled Motivation Autonomous Motivation
Most
Autonomous
Intrinsic Motivation
Introjected
Regulation
Identified
Regulation
Integrated
Regulation
Intrinsic
Regulation
Nonregulation
Lack of
Motivation
Least
Autonomous
Sources: Deci and Ryan (1985), Ryan and Deci (2000)
Figure 1.
Continuum of
motivation in
self-determination
theory (SDT)
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To the author’sknowledge,thefieldofemployeeengagementhasreceivednoscholarly
attention based on SDT since Meyer and Gagné (2008) positioned employee engagement within
the SDT framework. Following Meyer and Gagné (2008) and Fernet, Austin, Trépanier, and
Dussault (2013) it is suggested that there is substantial merit in applying SDT to employee
engagement research to advance the theory around employee engagement and provide
practical solutions for improving organizational performance through employee engagement. In
this study, SDT provided the conceptual framework for testing the following inter-disciplinary
model for employee engagement.
Toward a model for employee engagement economics
People as value. Financial figures are the “language of business.”Corporate performance has
traditionally been expressed and reported in numbers such as productivity, profitability or
earnings per share. In this context, machines, buildings or brand names are considered
corporate assets supporting company operations and performance. Conversely, people
are treated as cost or expenses whose 4Ds (damage, disease, disorder and dysfunctions)
(Bakker and Schaufeli, 2008) need to be managed to prevent under-performance. Recent
contributions to literature, for example Luthans’(2002) introduction of Positive
Organizational Behavior, suggest a shift of perspective from managing the downsides of
4D to facilitating the potential upsides of people behavior (Gruman and Saks, 2011;
Macey et al., 2009). With regards to employee engagement Macey and Schneider (2008) add
that “companies that get the conditions ( for employee engagement) right will have
accomplished something that competitors will find very difficult to imitate”(p. 26). However,
despite scholarly advice on the benefits of a shift of perspective, there still seems to be a
substantial gap between what practice needs and research does (Bakker and Schaufeli,
2008). So far, research has failed to deliver on a widely accepted conceptual foundation for
employee engagement including measurement tools as a basis for implementing scholarly
advice in daily business operations. For example, theory and practice have long suggested
that the economic benefits of organizational design, training and development to increase
employee engagement need to be highlighted in order to turn people decisions into strategic
business decisions (Boudreau and Ramstad, 2002; Cappelli, 2015; Gary, 2003; Macey
and Schneider, 2008; Naznin and Hussain, 2016; The Boston Consulting Group, 2017).
In response to such claims, this paper proposes the following economic model for a
cost-benefit analysis of organizational interventions to increase employee engagement.
An economic value model for people. For the purpose of this initial introduction, the EVA
model is presented as a single period model, that is all numbers and assumptions are on a
one year basis.
Step 1. As part of their work on psychological capital, Luthans et al. (2007) apply Kravetz’
(2004) assumption that the total dollar value that an employee was costing an organization
per year was approximately twice the employee’s annual base salary accounting for fringe
benefits and a share of overhead cost in addition to base salary. If an organization’s average
base salary is doubled and multiplied by its number of employees, the total dollar value of
the organizations workforce can be calculated at:
TotalValueperEmployee ¼2"BS
TotalValueAllEmployees ¼TotalValueperEmployee "NEmployees;
where TotalValue
perEmployee
is the total dollar value of one employee at cost per year,
TotalValue
AllEmployees
the total dollar value of all employees at cost per year, BS the annual
base salary, and N
employees
the number of employees.
Going concern is a key business principle in the preparation of financial accounts
suggesting a company or entity will be able to continue operating for a time (at least 12 months)
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sufficient to carry out its commitments, obligations and objectives (Venuti, 2004). By applying
the going concern principle to engagement it is suggested that, for any organization to sustain
its operations, the dollar value of engagement of its people cannot fall short of the dollar value
of employee cost on a continuous basis. Expressed differently, employees’engagement needs to
create more dollar value for an entity than the dollar value of employees’total cost.
Gallup’s three categories of employee engagement (engaged, disengaged, actively
disengaged) are used and their definitions are adapted in terms of their value creation/
destruction potential within the EVA model (see Figure 2). If the value creation should be at
least the value of cost and assuming that disengaged employees create what they cost,
engaged employees need to pick up all value that is being destroyed, that is economic loss,
by actively disengaged employees in order for the going concern assumption to be fulfilled.
That way, the value creation of each engaged employee can be calculated at:
IncrVCperEngEmployee ¼NActDisEmployees=NEngEmployees
!"
"TotalValueperEmployee
TotalVCperEngEmployee ¼TotalValueperEmployee þIncrVCperEngEmployee;
where IncrVC
perEngEmployee
is the incremental dollar value created by each engaged
employee beyond cost; TotalVC
perEngEmployee
the dollar value created by each engaged
employee; TotalValue
perEmployee
the total dollar value of one employee at cost per year;
N
ActDisEmployees
the number of actively disengaged employees; and N
EngEmployees
the number
of engaged employees.
Step 2. In a second step, the following question arises: If the engaged employees can
create value at the level they do, why not the disengaged and actively disengaged
employees? That means there is a potential of foregone dollar value that is not being created,
that is economic loss, by having disengaged and actively disengaged people in the
organization (see Figure 3).
This potential total foregone dollar value, that is the total value creation potential, can be
calculated at:
PVforegone ¼IncrVCperEngEmployee "NDisEmployees þTotalVCperEngEmployee "NActDisEmployees;
where PV
foregone
is the potential foregone dollar value, IncrVC
perEngEmployee
the incremental
dollar value created by each engaged employee beyond cost, TotalVC
perEngEmployee
the
Gallup Framework
Definitions
Economic Model
Definitions
Value of
Engagement
Share of
Overhead
Fringe
Benefits
Base
Salary
Engaged
Dis-Engaged
Activity
Dis-Engaged
Value of
Cost
Creating value
beyond cost
Destroying value
of cost
Creating value
at cost
Positively committed,
making a positive
contribution
Unproductive, spreading
negativity to co-workers
No discretionary effort,
do as they are told
≈2×Base Salary
(Kravetz, 2004
Figure 2.
Economic value
added (EVA) model
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dollar value created by each engaged employee, N
DisEmployees
the number of disengaged
employees, N
ActDisEmployees
the number of actively disengaged employees.
Step 3. In the third step, the author’s approach introduces SDT and its drivers of
motivation, namely, the satisfaction of basic psychological needs of autonomy, competence and
relatedness. An employee survey measures autonomy, competence and relatedness need
satisfaction as well as engagement levels. Subsequently, autonomy, competence and
relatedness need satisfaction scores are combined into a total need satisfaction (TNS) score.
Statistical analyses of correlation and regression will provide the strength of links between
TNS and the outcome of engagement. Individual work factors such as Maslach and Leiter
(1997) could be included in a survey to provide further guidance on environmental factors and
potential interventions to increase employee engagement but will not be further discussed here.
Assuming a positive correlation of r
xy
between TNS and employee engagement and the
potential foregone dollar value, the potential value creation to be achieved by an intervention
to increase employees’TNS at work can be calculated at:
ExpVC ¼ExpENGImpact "PVforegone
ExpENGImpact ¼rxy "ExpTNSImpact ;
where ExpVC is the expected dollar value created by intervention, r
xy
the correlation between
TNS and employee engagement in % (i.e. if TNS increases by 100, employee engagement
increases by r
xy
%fromastatisticalperspective);ExpTNSImpact the expected impact of
intervention on TNS in %, (i.e. the interventionisexpectedtoincreaseTNSbyExpTNSImpact
%); ExpENGImpact the expected impact of intervention on employee engagement in %, (i.e. the
intervention based expected increase in TNS is expected to translate into an increase in employee
engagement by ExpENGImpact %); and PV
foregone
the potential foregone dollar value.
Step 4. The cost-benefit analysis of an individual measure, such as organizational
design, training, or development, to increase employee engagement would give a return on
investment (ROI) of:
ROI ¼ExpVC=TotalCostIntervention;
where ExpVC is the expected dollar value created by intervention; TotalCost
Intervention
the
total dollar cost of the intervention.
Engaged
Employees
DisEngaged
Employees
Actively
DisEngaged
Employees
Foregone Value
for each
DisEngaged
Employee
Foregone Value
for each
Actively DisEngaged
Employee
Value
created by each
Engaged Employee
Value of each
Employee’s Cost
(2 ×Average Base Salary)
Figure 3.
Foregone dollar value
for each disengaged
and actively
disengaged employees
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The proposed EVA model was tested by conducting two consecutive studies. Study 1
applied a pre-post research design to assess the impact of an intervention on employee
engagement between times T1 and T2. On the basis of study one results, study two
projected cost and benefits at T1 and evaluated actual cost and benefits at T2.
Study 1
Method
Participants. Data were collected by inviting 1,211 employees in a business unit of a
European pharmaceuticals company to participate in this research. The data collection
process took place in two steps, in September 2015 (T1) and February 2017 (T2).
Procedure. At times T1 and T2, employees were invited to fill out the same survey. There
was an online and a paper version for the survey. Both data collection channels informed
participants that they were consenting to the procedure by filling out the online or paper
questionnaire. Participants were further informed that their survey data would be linked to
actual personal information (actual absenteeism data) from company records. Before filling
out the survey, participants had received a four digit secret number matching their
personnel number to be inserted at the beginning of the survey. The “key”linking secret
numbers with personnel numbers was administered by a local law firm as trustee.
No incentives or compensation were provided for participation.
In step 1 (T1), full data records were collected from 387 workers (32 percent participation
rate). A total of 27 percent were women, M
age
¼40.1 years, SD
age
¼9.2. Subsequently, step
2, a change management consulting firm was retained for an intervention project over 11
months ( January–November 2016). The 387 workers who participated at T1 were randomly
divided into two groups of 194 (intervention group) and 193 (control group) participants,
respectively. Finally, in a third step (T2), 271 of the 387 workers from T1 provided full
survey data collected with the same questionnaire from T1. At T2, data were collected from
162 intervention group employees (employee turnover: 7, participation rate: 87 percent,
30 percent female; M
age
¼41.2; SD
age
¼7.5) and 109 control group employees (employee
turnover: 21, participation rate: 63 percent, 27 percent female; M
age
¼39.8; SD
age
¼7.0. Their
T2 responses were linked to T1 responses by personnel numbers (Figure 4).
Measures. All measures were administered in English language.
Basic psychological need satisfaction. The 21-item Basic Psychological Need Satisfaction
at Work Scale (BPNS-W) (Deci et al., 2001) assessed satisfaction of autonomy (seven items;
e.g. “I am free to express my ideas and opinions on the job”), competence (six items;
e.g. “People at work tell me I am good at what I do”), and relatedness (eight items; e.g.
“I really like the people I work with”). Responses were made on a seven-point Likert-type
scale, ranging from 1 (not at all true) to 7 (very true). Scores for each subscale were computed
by averaging associated individual item scores; high scores represented higher levels of
satisfaction of basic psychological needs. A total basic psychological need satisfaction
(TNS) score was calculated by adding the three subscores. The BPNS-W has been shown to
T1 T2
Intervention
Project
September
2015
January – November
2016
February
2017
Figure 4.
Design and time
line used for data
collection and
intervention
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be a reliable and valid tool. Cronbach’sαfor the three BPNS-W subscales were 0.81
(autonomy), 0.76 (competence) and 0.83 (relatedness).
Employee engagement. Engagement was assessed by the SVS (Ryan and Frederick, 1997).
Even though the original scale had seven items, subsequent work by Bostic et al. (2000) using
confirmatory factor analysis indicated that a six-item version, which was used in this study,
demonstrated stronger psychometry qualities. Responses were made on a seven-point
Likert-type scale indicating the degree to which a statement (e.g. “I feel alive and vital”) was
considered true in general, ranging from 1 (not true at all) to 7 (very true). The score was
computed by averaging the individual item scores; a high score represented higher employee
engagement. The SVS has been extensively validated showing a high reliability. Cronbach’sα
for the SVS in previous studies have ranged between 0.84 and 0.91 (Nix et al., 1999; Ryan et al.,
2010; Vansteenkiste et al., 2006). The internal consistencies of the SVS in this study were 0.89.
Intervention project. The intervention group was sub-divided into 13 work groups (12 work
groups of 15 employees, 1 work group of 14 employees). Each work group underwent the same
procedure of an initial one day workshop in January 2016 (presentation of survey results and
collection of feedback) followed by five full day workshops/coachings (in February, April,
June, September and November 2016) on the drivers of employee engagement based on SDT
“ABC Coaching”.
ABC coaching. The five full day workshops introduced the core principles of SDT. As
basic psychological need satisfaction is hard to communicate as a concept in practice,
following Sheldon’s (2011, p. 553) contribution, basic psychological needs were promoted as
“mental vitamins.”Also, the need for relatedness was re-named as belonging, further
facilitating communication with participants by speaking of mental vitamin A(utonomy),
mental vitamin B(elonging) and C(ompetence), or the “ABC of Employee Engagement.”
After introduction, coaches helped participants work out in groups what A, B and C meant
for each of them, how ABC supply could be increased in their respective work environments,
how they could help or be helped, and discuss personal experiences and challenges in
applying the ABC approach to daily operations.
Preliminary data analysis at T1. Data screening was conducted to ensure that assumptions
for the associated statistical analyses were met. Descriptive statistics indicated that all data
were within expected ranges, with plausible mean and standard deviation scores. At T1, data
from an initial 418 participants (312 at T2) were screened and corrected for missing values.
Cases with W5 percent missing data were inspected, with 31 (41 at T2) participants ultimately
being deleted due to large scale, non-random, missing values. Missing data points for the
remaining 387 participants (271 at T2) were considered random. Mean substitutions were used
to estimate missing values on continuous variables, while mode substitutions were used for
categorical variables. Although mean substitution is a conservative procedure which reduces
variance, any method for replacing missing values utilized in large samples with o5 percent
missing data points yields similar results (Tabachnik and Fidell, 2007).
All variables were examined for fit between the distributions and assumptions for
parametric tests. Shapiro–Wilk, Kolmogorov–Smirnov and Levene’s statistic tests of
normality were significant for all variables (po0.001). Field (2009) points out that statistical
normality is rarely achieved in large samples. A visual examination of distributions
indicated no gross deviations from normality for all variables. In conclusion, the use of
parametric tests was considered justified.
To minimize the effects of common method variance, international business
research and behavioral sciences guidance was followed (Chang and Eden, 2010; Podsakoff
et al.,2003)byrandomizingquestionnaireitems.AHarman’sone-factortestwasperformedto
detect a potential common method variance issue. No general factor was apparent in the
unrotated factor structure. While the results of this analysis do not preclude the possibility of
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common method variance, they do suggest that common method variance is not of
great concern and, thus, is unlikely to confound the interpretations of results (Harman, 1967;
Podsakoff and Organ, 1986).
Results
Table II shows the results for basic psychological need satisfaction scores at times T1 and T2.
An independent samples t-test was used to compare basic psychological need satisfaction
and engagement scores as well as absenteeism data for the intervention group and the control
group at T1. The t-test was statistically significant for A-NS, t(269) ¼−0.41, po0.0128, 95% CI
two-tailed, d¼−0.27 (small effect) and R-NS, t(269) ¼−0.36, po0.0274, 95% CI two-tailed,
d¼−0.30 (small effect). The t-test was not statistically significant for C-NS, t(269) ¼0.04,
p¼0.8064, 95% CI two-tailed, d¼0.03, engagement, t(269) ¼−0.18, p¼0.2684, 95% CI two-
tailed, d¼−0.08, and absenteeism, t(269) ¼1.80, p¼0.1589, 95% CI two-tailed, d¼0.17 (see
Table II for A-NS, C-NS, R-NS and T-NS as well asFigure5forengagementandabsenteeism).
Bivariate correlation was used to assess the linear relationships between TNS,
engagement and absenteeism (Figure 6) at T1.
Changes from T1 to T2
Two-tailed paired samples t-tests with an αlevel of 0.05 were used to compare T2 to T1
levels of TNS, engagement and absenteeism for both intervention group and control group.
Intervention group Control group
N¼387 N ¼162 N ¼109
T1 T1 T2 T1 T2
MSD MSD MSD MSD MSD
A-NS
(a)
3.78 1.51 3.50 1.49 4.01 1.21 3.91 1.55 4.01 1.45
T2/T1 change +14.6% +2.6%
C-NS
(a)
4.92 1.24 4.93 1.30 5.04 1.31 4.89 1.34 4.81 1.31
T2/T1change +2.2% −1.6%
R-NS
(a)
3.91 1.32 3.71 1.24 4.41 1.36 4.07 1.11 4.40 1.23
T2/T1change +18.9% +8.1%
T-NS
(b)
12.61 3.47 12.14 3.41 13.46 3.21 12.87 3.37 13.22 3.09
T2/T1 change +10.9% +2.7%
Notes:
(a)
NS, need satisfaction; A, autonomy; C, competence; R, relatedness;
(b)
T-NS, total need satisfaction
Table II.
Means and standard
deviations of BPNS-W
subscales and total
need satisfaction at
Times T1 and T2
Engagement Absenteeism
M=4.08
SD =1.31
M=4.26
SD =1.31
M=4.51
SD =1.14
M=4.31
SD =1.24 M=10.1
SD = 9.8
M=11.9
SD =10.6
M= 9.8
SD = 9.8
M = 9.1
SD = 8.1
T1 T2 T1 T2
Control GroupIntervention Group
Figure 5.
Means and standard
deviations for
engagement and
absenteeism for
intervention group
and control group at
times T1 and T2
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Intervention group. At the intervention group level, tests were statistically significant for
A-NS (t(161) ¼0.51, p¼0.0000, d¼0.38), R-NS (t(161) ¼0.70, p¼0.0000, d¼0.54), T-NS
(t(161) ¼1.32, po0.0006, d¼0.40), engagement (t(161) ¼0.43, po0.0043, d¼0.35) and
absenteeism (t(161) ¼−2.8, po0.0081, d¼0.30). No statistically significant change was
detected in levels of C-NS (t(161) ¼0.11, p¼0.4486, d¼0.08).
Control group. For the control group, the test for R-NS (t(108) ¼0.33, po0.0412, d¼0.28)
was statistically significant. All other tests were statistically not significant, that is A-NS
(t(108) ¼0.10, p¼0.6233, d¼0.07), C-NS (t(108) ¼−0.08, p¼0.6563, d¼−0.06), T-NS
(t(108) ¼0.35, p¼0.4251, d¼0.11), engagement (t(108) ¼0.05, p¼0.7726, d¼0.04) and
absenteeism (t(108) ¼−0.30, p¼0.8214, d¼−0.03).
Discussion
The aim of study 1 was to investigate the causal implications of an 11 months intervention
project on employee engagement based on SDT as a conceptual framework. Specifically, the
investigation measured the impact of six full day team coaching sessions on self-reported
levels of TNS and employee engagement, using subjective vitality as a measure for
employee engagement, as well as actual absenteeism data from company records and
compared it to a control group that did not undergo coaching.
Total basic psychological need satisfaction showed a strong positive correlation with
employee engagement and a negative association with absenteeism. Employee engagement
was also negatively correlated with absenteeism. This finding indicates that increasing
employee engagement is associated with a reduction in absenteeism. Taking SDT
research-based findings of positive associations between basic psychological need satisfaction
and, in turn employee engagement, and outcomes such as performance, creativity, quality,
goal attainment, persistence, organizational citizenship behavior, physical and psychological
health and well-being into consideration, the findings suggest that the organizational focus
should be rather on increasing employee engagement than on decreasing absenteeism.
The intervention seemed to make a significant positive difference to the measured
intervention group outcomes. Autonomy and relatedness need satisfaction, engagement and
absenteeism showed significant positive changes as a result of the ABC coaching. Surprisingly,
the intervention did not seem to have an impact on participants’competence need satisfaction.
This result could be attributed to the intervention method failing to advance participants’
perception of competence. Alternatively, employees’attention may have focused on what they
may have felt were the more “needy”areas of autonomy and relatedness. The changes in
relatedness need satisfaction showed the strongest effect size for the intervention group.
This may have translated to control group employees in daily business operations. There were
no significant differences in control group outcomes except for relatedness need satisfaction
which had a small effect size. Some scholars have suggested that increasing employee
Total Need
Satisfaction (TNS)
Engagement
Absenteeism
0.491**
–0.159**
–0.145*
Notes: *p<0.05; **p<0.001
Figure 6.
Bivariate correlations
between total need
satisfaction,
engagement and
absenteeism at T1
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engagement not only had a positive effect on the individual employees themselves but also had
a contagious effect within work environments (Bakker, 2011; Schaufeli and Salanova, 2007).
Maybe the need for relatedness was the first basic need of control group participants to be
affected by such a social contagion effect. Possibly, the effect may have also shown for the
needs of autonomy and competence if the intervention had continued or data would have been
collected at a later point in time, both providing more time for the effect to manifest itself.
T2 data seem to indicate a limit to autonomy and relatedness need satisfaction scores. Even
though intervention group scores for autonomy and relatedness were significantly lower at T1
and had increased substantially by T2, they did not outperform the control group’s scores (no
ABC coaching) for autonomy and relatedness. No SDT literature to date has found universal
limits to any of the three basic need satisfaction scores of autonomy, competence and
relatedness. Nonetheless, there may be company-specific limits to how autonomous, competent
and related employees feel based on individual organizational settings.
In conclusion, study 1 results support SDT as a conceptual framework including subjective
vitality as a measure for employee engagement. The findings showed a significant positive
impact of the SDT-based intervention on both self-reported and actual outcomes.
Study 2
Method
The results of study 1 were used as input variables to test the proposed EVA model.
Results
At T1, subjective vitality scores were used to categorize 162 intervention group participants
into engaged (21 participants (13 percent), scores ranging from 5.0 to 7.0), disengaged (125
participants (77 percent), 3.0 to 4.99) andactivelydis-engaged(16participants
(10 percent), 1.0–2.9) employees. This distribution of engagement levels is consistent
with market research findings for Europe (The Gallup Institute, 2013) and represented by
the intervention group engagement score of M
engagement
(intervention group) ¼4.08,
SD
engagement
(intervention group) ¼1.31 at T1. The average annual base salary of
intervention group employees was M
salary
¼€31,520, SD
salary
¼€8,258.
Planning and projections at T1
Step 1. The total value of intervention group employees at cost was estimated at:
TotalValueperEmployee ¼2"BS ¼$63;040
TotalValueAllEmployees ¼TotalValueperEmployee "NEmployees
¼$63;040 "162 ¼$10;212;480:
Using the input data at T1 as input variables for the proposed EVA model, the following
value creation parameters for each engaged employee can be calculated:
IncrVCperEngEmployee ¼NActDisEmployees=NEngEmployees
!"
"TotalValueperEmployee
¼16=21
!"
"$63;040 ¼$48;030;
TotalVCperEngEmployee ¼TotalValueperEmployee þIncrVCperEngEmployee
¼$63;040þ$48;030 ¼$111;070:
That means, each of the 21 engaged employees created $48,030 in value on top of her/his
cost of 2 ×base salary (2 ×$31,520 ¼$63,040) for the company.
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Step 2.
PVforegone ¼IncrVCperEngEmployee "NDisEmployees þTotalVCperEngEmployee "NActDisEmployees
¼$48;030 "125þ$111;070 "16
¼$6;003;750þ$1;777;120 ¼$7;780;870:
The value creation potential for the company by increasing employee engagement is
approximately $7.8m, consisting of a value creation potential of $6m in the area of
disengaged employees and $1.8m in the area of actively disengaged employees.
Step 3. The mean engagement score of M
engagement
(intervention group) ¼4.08,
SD
engagement
(intervention group) ¼1.31 at T1 (see Figure 5) is representative of the above
value creation potential of $7.8m. The correlation between total basic psychological need
satisfaction (T-NS) and engagement was identified as r
xy
¼0.491 or 49.1 percent (see
Figure 6). It can be concluded that if an intervention increased employees’T-NS by, for
example, by 10 percent (ExpTNSImpact at T1), employee engagement could be projected to
increase by 4.91 percent (ExpENGImpact), in turn, creating a value of:
ExpENGImpact ¼rxy "ExpTNSImpact
¼49:1%"10%¼4:91%
ExpVC ¼ExpENGImpact "PVforegone
¼4:91%"$7;780;870 ¼$382;041:
Step 4 . The total cost of the intervention consisted of two main items, change consultants’
cost of a flat fee of $295,000 and the cost of employees attending the workshops (instead of
performing their respective work roles) which were calculated at:
TotalValueperEmployee=240 workdays per year
!"
"Nemployees "6 workshop days
¼2"BS=240
!"
"162 "6¼$63;040=240
!"
"162 "6¼$255;312:
Together the total cost for the intervention was calculated at $550,312. In conclusion, at T1,
the projected ROI for the intervention measure was estimated at:
ROIprojected T1 ¼ExpVC=Projected Total Cost
¼$382;041=$550;312 ¼69;4%:
Reconciliation and evaluation at T2
At T2, the intervention group’s actual total basic psychological need satisfaction
(ActTNSImpact) had increased by 10.9 percent (see Table II, projected increase at T1:
ExpTNSImpact ¼10 percent) and actual employee engagement had increased by 10.5
percent (ActENGImpact) from 4.08 to 4.51 (see Figure 5; projected increase at T1:
ExpENGImpact ¼4.91 percent). As a result, the actual value creation through the
intervention measure can be calculated at:
ActVC ¼ActENGImpact "PVforegone;
where ActVC is the actual dollar value creation; ActENGImpact the actual impact
of intervention on employee engagement in %; and PV
foregone
the potential foregone
dollar value:
ActVC ¼10:5%"$7;780;870 ¼$816;991;
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and the post-intervention ROI calculation at T2 gives an actual ROI of:
ROIactualT2 ¼ActVC=Actual Total Cost
¼$816;991=$550;312 ¼148;5%:
Absenteeism economics
Even though this paper postulates a value creation instead of cost perspective on
employees, the value of cost savings through the reduction in absenteeism days as a result
of the intervention is calculated for comparison reasons. Absenteeism days for the
intervention group were reduced from M
absenteeism
(T1) ¼11.9 to M
absenteeism
(T2) ¼9.1, that
is 2.8 days per employee (see Figure 5). The daily value of cost per employee can be
calculated at:
DailyValueperEmployee ¼TotalValueperEmployee=240 workdays per year
!"
¼2"BSðÞ=240 ¼$63;040=240 ¼$263=day:
And the value of total cost savings through the reduction of absenteeism was determined at:
TotalValueAbsCostSav ¼DailyValueperEmployee "AbsentImpact "Nemployees;
where TotalValue
AbsCostSav
is the total dollar value of cost savings through a reduction in
absenteeism; AbsentImpact the reduction in absenteeism days as a result of intervention:
TotalValueAbsCostSav ¼$263 "2:8"162 ¼$119;297:
The ROI of the intervention based on the reduction in absenteeism alone was:
ROIabsenteeism ¼TotalValueAbsCostSav=Actual Total Cost
¼$119;297=$550;312 ¼21:7%:
Discussion
The aim of study 2 was to test the proposed EVA model based on the data collected for
intervention group employees in study 1. A cost-benefit analysis was performed comparing
the value created through the intervention related increase in employee engagement to
the total cost of the intervention. Furthermore, the value created through an increase in
employee engagement was compared to the cost savings achieved through a reduction
in absenteeism days.
The findings yielded a much higher actually achieved ROI of 148.5 percent at T2 than
planning had originally projected at T1 (69.4 percent). There is no practical guidance at this
point on how much change in total basic psychological need satisfaction an intervention will
translate into. The T1 projection of a 10 percent change in T-NS was surprisingly accurate
(T2 change of 10.9 percent). At the same time, the increase in employee engagement was
more than double (10.5 percent) what the statistical model had predicted at T1 (4.91 percent).
Similar to estimating sales as a result of an advertising campaign or cash flow projections of
an investment case, using the EVA model represents a learning experience with projection
accuracy increasing with progressive use.
The EVA model further shows that the ratio of engaged over actively disengaged
employees plays a critical role for organizations. One of the assumptions of the EVA model
is that engaged employees need to create all the value that is being destroyed by actively
disengaged employees. That means, the fewer engaged and the more actively disengaged
employees in an organization the more value needs to be created by each engaged employee
to make up for the shortfall caused by actively disengaged employees. In this case, there
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were 1.31 engaged employees for each actively disengaged employee resulting in an
incremental value creation of 76 percent of each engaged employee over its total value of
annual cost estimated at twice annual base salary.
The results of study 2 further show that the company’s employee engagement-related
value creation potential of $7.8m was unevenly distributed between disengaged ($6m) and
actively disengaged ($1.8m) employees. That means, in terms of prioritizing organizational
measures, the focus in this case should rather be on converting disengaged into engaged
employee than, for example, identifying and letting go of actively disengaged employees.
When comparing EVA outcomes between employee engagement and absenteeism, it can
be concluded that the cost savings based on the reduction in absenteeism days ($119,297)
were substantial with an ROI of 21.7 percent on intervention cost. However, the calculated
value creation of the increase in employee engagement ($816,991) was 6.8 times absenteeism
cost savings.
In summary, these findings show how the EVA model can be applied as a
strategic decision-making tool for planning and evaluating the economics of employee
engagement interventions.
General discussion
This paper started with an overview of the hazy and confounding evolution of the theory
of employee engagement. Even though literature has exploded over the last decade,
comparatively little theoretical progress has been made. For example, Macey and
Schneider’s (2008) observation of a lack of definition for disengagement in literature does
not seem to have received a response to date. If a “theoretical return on literature
investment”ratio was calculated, employee engagement would certainly contend for last
spot compared to any other topic in the organizational sciences.
This lack of theoretical development has had implications for practice. Employee
engagement has been shown to be positively associated with high-level business outcomes
such as profitability, productivity or customer satisfaction (Harter et al., 2002). However, as
long as there is still substantial controversy over what constitutes employee engagement
and what measurement tools are really measuring, the business community cannot be
expected to approve costly intervention programs to increase employee engagement.
Moreover, research has failed to address the main effect of concern to business executives,
namely, the economic benefit of individual employee engagement intervention measures
(Cappelli, 2015; Macey and Schneider, 2008; Naznin and Hussain, 2016).
Bailey et al. (2017) suggest that employee “engagement research is entering into a more
advanced, yet still uncertain, stage of theoretical and empirical development”(p. 48).
Following Bailey et al.’s (2017) postulate, this research aimed at theoretical integration of
scattered directions in employee engagement as a basis for concerted future research as well
as persuasive business solutions.
This paper contributes the first empirical economic model for employee engagement
interventions to literature. It is based on the first reconciliation of engagement literature
identifying SDT as a unifying framework. Finally, for the first time, this work identifies
subjective vitality as a measure for engagement and contributes a definition for
disengagement to literature.
This investigation re-emphasized Meyer and Gagné’s (2008) suggestion of SDT as a strong
unifying theory for employee engagement. To the author’s knowledge, this paper represents
the first SDT-based empirical investigation into employee engagement. This research further
extends previous literature including Meyer and Gagné (2008) by proposing subjective vitality
as an appropriate theoretically grounded measure for employee engagement and contributing
a first-time definition of disengagement. Positioning employee engagement as a higher-order
construct with multiple dimensions (Christian et al., 2011) grounded in SDT including
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subjective vitality as a higher-order measurement scale for employee engagement does
not downgrade theoretical achievements to date. Instead, it provides an opportunity for
integration of various dimensional constructs and measurement scales as well as more focused
future research.
Study 1 used an SDT-based intervention. The results suggest SDT as a practical
framework for effective business interventions. In response to a lack of pre-post, causal
studies with actual data in the field of employee engagement (Bailey et al., 2017), this
research captured the T2/T1 effects for an intervention group in comparison to a control
group through self-reported as well as actual performance data. For the first time, subjective
vitality was applied as a higher-order measure for engagement.
In conclusion, study 1 results supported SDT as a unifying conceptual framework for
theory and practice in the field of employee engagement. Future research designs should
further reconcile previous dimensional conceptualizations with the constituent parts of SDT.
Dimensional measurements are useful and provide very specific insights for researchers and
practitioners. Future research may further explore the relationships between subjective
vitality as a higher-construct measure of employee engagement and previously established
dimensional measurements. Practice could further benefit from SDT as a basis for
organizational design, training and development interventions to increase employee
engagement and, in turn, corporate performance.
In study 2, the EVA model underlined the substantial scope for value creation in companies
by putting employee engagement on the strategic agenda. So far, corporate economic
considerations in the context of employees were limited to cost-cutting measures such as a
reduction in absenteeism. These results show that the value creation of increasing employee
engagement can be substantially larger than mere cost-savings, almost seven times in this
case study. On the other hand, cost savings are direct contributions to the bottom line whereas
employee engagement’s actual and potential value creation might be more difficult to track by
financial reporting and accounting standards. Nonetheless, the author proposes the EVA
model to be consistent and compatible with traditional financial shareholder value-based
investment decision models, for example, discounted cash flow. Consequently, the EVA model
qualifies as an executive decision-making tool helping companies plan and evaluate the cost
and benefits of investments into employee engagement.
Limitations and future research
There are limitations to this research. First of all, the research was conducted in the setting
of a European pharmaceuticals company. That means results may have been impacted by
European, industry-specific and organizational cultural values preventing the generalization
of results to other geographic areas, industries or organizations. Future research should
replicate this work in various contexts to identify similarities and differences.
Second, the EVA model is based on a set of assumptions. It is a single-period model,
which means, it only captures the effects of an intervention over a 12-months period. This is
a conservative estimate. A multi-period model discounting beneficial organizational effects
beyond 12 months with an appropriate discount rate could give higher ROI figures as the
investment at T1 would remain the same but the sum of discounted returns over multiple
periods would be higher.
Thirdly, the categorization of employee engagement levels by equal distance intervals of
the SVS, the assumptions regarding the value creation or destruction of engaged,
disengaged and actively disengaged employees as well as the going concern hypothesis
were not based on empirical evidence. As such, the EVA model represents an invitation to
researchers to validate and specify its assumptions. The EVA model further offers the scope
for inter-disciplinary research. Maslach and Leiter (1997) suggested that “increasingly, we
work in job settings in which human values place a distant second to economic ones”(p. 9).
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The EVA model links both values. For example, future studies could investigate the economic
impact of organizational contexts such as Maslach and Leiter’s (1997) work factors of
workload, values, control, reward, fairness and community on employee engagement and, in
turn, organizational performance.
Conclusions
SDT and the EVA model are a strong combination of tools for a systematic approach to
increasing employee engagement and, in turn, performance in organizations. On the one hand,
SDT provides a unifying theoretical backbone including measurement for employee
engagement. On the other hand, the EVA model represents a first executive decision-making
tool for the cost-benefit analysis of intervention measures to increase employee engagement.
Together, SDT and EVA model can help organizations: analyze the situation on employee
engagement, design interventions to improve employee engagement, achieve executive approval
for interventions based on a cost-benefit analysis, and evaluate the success of the implementation
of interventions from both people and economic perspectives.
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Corresponding author
Marcus Mueller can be contacted at: muellerm@sacredheart.edu
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