Job Satisfaction, Commitment, Loyalty and Engagement Rotterdam, the Netherlands 22 June 2010

1. Job Satisfaction, Commitment, Loyalty and EngagementRotterdam, the Netherlands22 June 2010 Bill Collins, Ph.D. Rotterdam School of Management Erasmus University

2. Job Satisfaction

3. Job Satisfaction • Is defined as a pleasurable emotional state resulting from the appraisal of one’s job or an affective reaction to one’s job. • In general, it does not have a strong correlation (relationship) with on-the-job performance: r = +0.15 • Job satisfaction and work performance correlate overall at about +0.15, though more strongly than this for white collar workers. • However, even if satisfaction does not cause performance, having satisfied employees may still directly benefit the organization • Job satisfaction is an important end in itself and organizational leaders ought to feel obligated to enhance the well-being and satisfaction of their employees. • Moreover, it seems to also have other direct benefits: lower employee turnover, less absenteeism, more organizational citizenship behaviors and few counterproductive work behaviors

4. Engagement

5. Defining Engagement • Rather than a momentary and specific state, engagement refers to a more persistent and pervasive affective-cognitive state that is not focused on any particular object, event, individual, or behavior. • Engagement is the behavioral provision of personal resources - time and energy - into one’s work role, and it is the higher order construct indicated by dependable covariation among several work behaviors: job performance, withdrawal, and citizenship behavior. (Harrison et al., 2006). • Engagement reflects the extent to which a person is psychologically present in the performance of their work roles. It involves ‘‘the harnessing of organization members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally during role performances’’ (Kahn, 1990).

6. My definition of Employee Engagement Employee Engagement must involved some sort of behavior or cognition (e.g., problem solving, creativity) that is actionable (i.e., can have some sort of “result”) and is in the interest of the organization. Like engaging a motor or engine, the machine can be fueled and running (motivated) but it is not “engaged” until it has been put in gear and the potential is converted into actual action (performance).

7. Resource-based view of firms often argues that the performance implications of human resources includes the degree of alignment of individual interest and organizational goals: “To the extent that individual members of the organization are motivated to behave in line with organizational goals, the POTENTIAL advantage derived from the availability of knowledge and skills translates into ACTUAL PEFORMANCE.” (Gottschalg & Zollo, 2007)

8. Potential Actual Outcomes = Performance Motivation Alignment Engagement

9. Potential Actual ? Outcomes = Performance Motivation Alignment Engagement

10. Potential Actual ? Outcomes = Performance Motivation Alignment Engagement Commitment Motivation and Commitment are not the same thing. However, commitment has been found to be a major contributor to motivation and it contains several components that directly link to my conceptualization of engagement.

11. Potential Actual Psychological State “in the mind” Translated into behaviors Outcomes = Performance Commitment Alignment Engagement The employee's psychological attachment to the organization

12. Commitment

13. Three Types of Commitment • Continuance Commitment • I stay because I have no alternative • Functional Value (What does the organization do for me) • Normative Commitment • I stay because I think I ought to stay • Emotional Value (How does the organization make me feel) • Affective Commitment • I stay because I want to stay • Emotional Value (How does the organization make me feel) • Self-expression Value (What does this organization say about me)

14. So, the question is: Why do people work and put in effort for your organization? • Money, benefits, perks, etc. • Great place to work: peers, bosses, trust, leadership, organizational support • Proud of the brand, work, service, products etc.

15. Customer Loyalty • Marketing literature suggests that customer loyalty can be defined in two distinct ways: • Loyalty as an attitude. Different feelings create an individual's overall attachment to a product, service, or organization. These feelings define the individual's (purely cognitive) degree of loyalty. • Loyalty as behaviors. • continuing to purchase services from the same supplier, • increasing the scale and or scope of a relationship • Make recommendations. • Benefits of Customer Loyalty • Creates increased profit through enhanced revenues, reduced costs to acquire customers, lower customer-price sensitivity, and decreased costs to serve customers familiar with a firm's service delivery system The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study (Hallowell, 1996)

16. Customer Loyalty [Employee Loyalty/Commitment Benefits of Employee Loyalty/Commitment • Reduced costs to acquire employees (reputation: Best Place to Work), • Lower employee-salary sensitivity, • Decreased costs to train, transfer and promote employees familiar with a firm's culture and values, • Increased scale and or scope of a relationship (extra-role behaviors): • Teamwork and helping others • Breaking down silos (e.g., cross-selling, information sharing) • Innovation and/or ingenuity Benefits of Customer Loyalty • Reduced costs to acquire customers, • Lower customer-price sensitivity, • Decreased costs to serve customers familiar with a firm's service delivery system, • Increased scale and or scope of a relationship

17. Customer Loyalty [Employee Loyalty/Commitment Customer Loyalty • Increase the likelihood of spending their discretionary income on your product • Resistance to the call of competitors’ products or services Employee Loyalty/Commitment • Increase the likelihood of expending their discretionary effort in the interests of your organization • Resistance to the call of competing interests and/or behaviors

18. Commitment & Engagement & Change Type of employee commitment Flexibility: Follow the money Focus: Resistant to Change Extrinsic Motivation Intrinsic Motivation Continuance “I don’t have a better alternative” Normative “I think I ought to stay” Affective “I stay because I want to stay” Page 37

19. Customer and Employee Loyalty = Resistance to Change Risks of Customer Loyalty • Loyalty to Product or Service • During the switch from a popular product or service to a new product or service, often much resistance from customers • Loyalty to Sales Person or Representative • When an representative leaves, often customers go with him/her • Loyalty to Brand • During M&As, a critical concern is always the resistance of the “loyal customers” to recognize the new brand Risks of Employee Commitment • Loyalty to Product or Service • During the switch from a popular product or service to a new product or service, often much resistance from employees • Loyalty to Boss • When an boss is promoted, transferred or quits, loyal employees resist the change or “jump ship” with “their” boss • Loyalty to Culture • During M&As, a critical concern is always the resistance of the employees to the new organization (culture, structure, etc.)

20. So, now the question is: To what should your employees become affectively committed or loyal? • It should be Strategic: Important enough to designate time and resources to building and maintaining commitment. • It should be Enduring: It should be stable enough that is not going to change soon or often.

21. Potential Actual Outcomes = Performance Disengagement (off-task) Disengagement (misalignment) Commitment Alignment Engagement

22. Potential Actual Looks like gossiping, party planning, updating CVs, Facebook, etc. Outcomes = Performance Disengagement (off-task) Disengagement (misalignment) Commitment Alignment Engagement Looks like work but is not performance related (off-target, too limited in scope) For the most part, employee satisfaction surveys measure this

23. Potential Actual 2 1 Outcomes = Performance Disengagement (off-task) Disengagement (misalignment) Commitment Alignment Engagement Two Major Challenges in Leadership • Build, in others, the commitment, excitement and passion to contribute • Know, communicate and ensure that the contribution of others is in-line with the interest of the organization.