Using Employee Opinions about

Organizational Performance to
Enhance Employee Engagement
Surveys: Model Building
and Validation
By Jack W. Wiley

38 PEOPLE & STRATEGY

Employee engagement surveys have grown in acceptance in the last 10 years because
organizations believe they can leverage employee engagement for higher employee retention,
greater customer satisfaction and improved financial performance (Harter, Schmidt, & Hayes,
2002). It is estimated that three of every four large firms in the United States survey their
employees (Kraut, 2006). International research has revealed that surveys are more common in
large organizations: 72% of organizations with more than 10,000 employees regularly conduct
surveys compared to only 50% of small organizations (i.e., those with between 100 and 249
employees) (Wiley, 2010). This same research reveals that over the last 15 years in the United
States among organizations with at least 100 employees, the percent conducting employee
surveys has increased from 50% to 60%.

Employee Engagement

D
efinitions of employee engagement EXHIBIT 1. THE FLOW OF EMPLOYEE ENGAGEMENT
vary but literature reviews reveal that
most are similar in terms of key com-
ponents. These common components Organiza(onal
include enthusiasm for work, commitment, policies and
organizational pride, employee alignment prac(ces
with organizational goals and a willingness Higher team,
to exert discretionary effort (Vance, 2006; Employee Discre(onary individual and
engagement eort organiza(onal
Robinson, 2007; Schneider, Macey, Bar- performance
bera, & Martin, 2009). In this context, the Leadership and
following definition of employee engagement managerial
is mainstream: The extent to which employ- behaviors
ees are motivated to contribute to
organizational success, and are willing to
apply discretionary effort to accomplishing
tasks important to the achievement of orga-
nizational goals.

The approach to measuring employee
engagement in this article aligns with Macey
& Schneider (2008), where engagement is
treated as a desired state, measured by an
equally weighted combination of four individ-
ual elements: pride, satisfaction, advocacy
and commitment. The rationale is straightfor-
ward: an engaged workforce is one whose
employees have pride in and are satisfied with
their organization as a place to work, and who
advocate for and intend to remain with their
organization. In this conceptualization
employee engagement is a result of organi-
zational policies and practices and leadership
and managerial behaviors that precede the
state of employee engagement, which pre-
cedes the display of discretionary effort that
promotes heightened individual, team and
organizational performance (Exhibit 1).
The questions used in the research summa-
rized in this article to measure employee
engagement are presented on a balanced
five-point Likert agreement scale, and are
listed below:
I am proud to tell people I work for my or-
ganization.
Overall, I am extremely satisfied with my
organization as a place to work.
I would recommend this place to others as
a good place to work.
I rarely think about looking for a new job
with another organization.
An Employee Engagement Index is created
from these four items, which is most typically
reported as percent favorable, that is, the
average level of agreement across the four
items. Employee Engagement Index coeffi-
cient alpha, an internal consistency estimate
of reliability, is quite high at .91 (Wiley, 2010).
Employee Engagement Drivers
What causes employee engagement index
scores to improve or decline? The answer is
relevant because employee engagement has
been linked to organizational performance
(Wiley, 2010). Using relative weights analysis
(or RWA) (Johnson, 2000) to identify the key
drivers of employee engagement, the top 10
drivers, across a study of 19 countries, are:
1. Confidence in organizations future
2. Promising future for ones self

VOLUME 36/ISSUE 4 2014 39

 3. Organization supports work/life balance
EXHIBIT 2. SUMMARY OF EMPLOYEE
4. Contribution is valued ENGAGEMENT ANTECEDENTS
5. Excited about ones work
Summary Concept References
6. Opportunity for growth and develop-
Leaders who build trust
ment and condence
Tim, Bakker & Xanthopoulou, 2011; Xu & Thomas, 2011

7. Safety is a priority Bakker & Bal, 2010; Bakker, Hakanen, Demerou( & Xanthopoulou, 2007;
Managers who recognize and Mauno & Kinnunen, 2007; Schaufeli, Bakker & Rhenen, 2009; Schneider,
8. Leadership has communicated a moti-
respect subordinates Macey, Lee & Young, 2009; Xanthopoulou, Bakker, Demerou( & Schaufeli,
vating vision 2009a
9. Organizations corporate responsibility Growth and development Bakker & Bal, 2010; Coetzer & Rothmann, 2007; Schaufeli, Bakker &
efforts increase overall satisfaction opportuni(es Rhenen, 2009

10. Quality and improvement are top priori- Bakker & Bal, 2010; Crawford, LePine & Rich, 2010; Khnel, Sonnentag &
ties. Westman, 2009; Mauno & Kinnunen, 2007; May, Gilson & Harter, 2004;
Work itself Parker, Jimmieson & Amiot, 2010; Richardsen & Burke, 2006; Schaufeli,
This listing can be reduced to a shorter list of Bakker & Rhenen, 2009; Schaufeli & Bakker, 2004; Xanthopoulou, Bakker,
four macro drivers or pillars of employee Demerou( & Schaufeli, 2009b
engagement. In broad terms, it appears
employees are engaged by:

Leaders who inspire confidence in the fu-
ture (drivers 1, 2 and 8)
Managers who recognize employees and
emphasize quality and improvement as top
priorities (drivers 4 and 10)
Exciting work and the opportunity to grow
and develop (drivers 5 and 6)
Organizations that demonstrate a genuine
responsibility to their employees and the
communities in which they operate (drivers
3, 7 and 9)
Consistency with Published
Research
The findings from this analysis are highly con-
sistent with what is reported in the academic
literature. Exhibit 2 summarizes what others
have identified as the antecedents or drivers
of employee engagement. Based on this sum-
mary, it seems reasonable to conclude that
employee engagement is based on senior
leaders who build trust and confidence, direct
line managers providing recognition and dem-
onstrating respect, employee-perceived
opportunities for growth and development
and, finally, enthusiasm generated by the
work itself. When organizations meet these
conditions, employee engagement levels will
be at their highest.
1. American Customer Satisfaction Index assets and provides an indication of how effi-
(ACSI) scores for 63 companies ciently management uses the organizations
assets to generate earnings (Crossland and
2. Diluted Earnings per Share (DEPS) for Hambrick, 2007). Total shareholder return is
168 companies a measure of the change in a companys
stock price plus dividends paid (Richard,
3. Return-on-Assets (R-O-A) for 203 com-
Devinney, Yip & Johnson, 2009).
panies
4. Three-year Total Shareholder Return These performance data pertain to the 2009
(TSR) for 187 companies performance period, typically reported in
early 2010. To select organizations to
By way of definition, the American Customer include in this research, agreement statis-
Satisfaction Index is an economic indicator tics (R wg) for survey respondents within
based on customer evaluations of US and each organization (with at least five partici-
foreign-owned entities selling products in the p a t i n g e m p l o y e e s 1) r e p r e s e n t e d i n
United States. Companies use ACSI evalua- WorkTrends were calculated. If the R wg
tions to improve and maximize their customer demonstrated low agreement, values great-
relationships, and this, in turn, drives cus- er than 1.0 and less than 0 (James,
tomer loyalty and profitability (Fornell, Claes, Demaree, & Wolf, 1984), the organizations
Rust & Dekimpe, 2010). were excluded. The resultant sample repre-
sents all major industries, including retail,
Diluted earnings per share takes into account banking and financial services, and manu-
standard earnings per share (income divided facturing, hospitality, healthcare and
by outstanding shares) but also accounts for business services. To achieve time corre-
what earnings would be if all outstanding spondence, Employee Engagement Index
stock options and warrants were exercised scores were also drawn from the same 2009
(Bens, Nagar, & Skinner, 2003). It is seen by period. The results are displayed in Exhibits
analysts as an accurate assessment of the 3-6.
health and profitability of an organization.
Return on assets is net income divided by
In this study, we assumed a direct consensus model of aggregation, and treated each employee as a rater or judge of
1

Employee Engagement and
Business Performance
To validate that the employee engagement
construct significantly relates to measures of
business success, Employee Engagement
Index scores were correlated with:
a higher level construct (Chan, 1998). Suggestions are not directly provided in the literature for the minimum number of
raters needed to reliably measure an organization level construct. James, Demaree, and Wolf (1984) indicated 10 raters
is a large number of judges, but a minimum was not offered. However, some guidance has been offered in the 360
degree performance feedback literaturethe standard practice there is at least 3 raters (Morgeson, Mumford, &
Campion, 2005). Borrowing that standard, our minimum of 5 raters per organization is conservative; especially
considering 10 raters is a large number. Further, in this study we are interested in variance between organizations, rather
than between employees. Therefore, the organization level sample size is more important than the employee level
sample size.

40 PEOPLE & STRATEGY

 EXHIBIT 3. EMPLOYEE EXHIBIT 4. EMPLOYEE
ENGAGEMENT AND CUSTOMER ENGAGEMENT AND DILUTED
SATISFACTION EARNINGS PER SHARE
2 1
American Customer Sa6sfac6on Index

0.6

Diluted Earnings Per Share

1 1.3

-1
-1

-1.8
-1.9
-2 -2
Top 25% of Bo=om 25% of Top 25% of Bo=om 25% of
Organiza6ons Organiza6ons Organiza6ons Organiza6ons
on Engagement on Engagement on Engagement on Engagement

Note: One-tailed Pearson correla6on, Note: One-tailed Pearson correla6on,

r=.21, p<.10, n=63, all values are mean centered r=.18, p<.02, n=168, all values are mean centered

EXHIBIT 5. EMPLOYEE EXHIBIT 6. EMPLOYEE

ENGAGEMENT AND ENGAGEMENT AND
SHAREHOLDER RETURN RETURN-ON-ASSETS
3 2
Three-year Total Shareholder Return

2
2.1
1 1
1.0
Return-On-Assets

0
0
-1

-2
-1
-3

-4 -2
-5 -5.5 -2.7

-6 -3
Top 25% of Bo=om 25% of Top 25% of Bo=om 25% of
Organiza6ons Organiza6ons Organiza6ons Organiza6ons
on Engagement on Engagement on Engagement on Engagement

Note: One-tailed Pearson correla6on, Note: One-tailed Pearson correla6on,

r=.19, p<.01, n=187, all values are mean centered r=.20, p<.00, n=203, all values are mean centered

VOLUME 36/ISSUE 4 2014 41

 These exhibits graphically depict the relation-
ships between the Employee Engagement
levels of employee engagement are those
organizations that enjoy significantly higher
Performance Excellence
Index and various measures of business per- levels of success as measured by the satis-
In the 1980s, a different stream of survey
formance. All statistical relationships are faction of their customers, the earnings they
activity began to link employee opinions
positive and in three of four cases significant. deliver to shareholders (in both immediate
about their place of work with productivity,
Only the Employee Engagement Index x and mid-term timeframes) and return on
customer satisfaction, and financial perfor-
ACSI correlation fails to meet the threshold assets. It is acknowledged that the 2009-
mance measures. This research started with
of statistical significance. Those organiza- 2010 period contained dramatic economic
the specific performance outcome research-
tions in the top quar tile of Employee challenges that may affect the relationship
ers better wanted to understand (e.g.,
Engagement Index scores outperform bot- between EEI and outcome measures and
customer satisfaction); it then worked
tom quartile Employee Engagement Index further time analyses would enable explora-
upstream to identify the elements of the
organizations by substantial margins. While tion of this. Even so, it is proposed that never
working environment (as measured through
these results are correlational and conclu- before has a linkage research study involving
an employee survey) most consistently
sions about causality cannot be asserted, a sample of organizations this size been pub-
associated with higher levels of that perfor-
they demonstrate that organizations who lished.
mance outcome. Multiple summaries of this
invest in the organizational, leadership and
research were produced (Wiley, 1996; Wiley
managerial practices that produce high
& Brooks, 2000; Wiley & Campbell, 2006).

The fundamental perspective of this research

EXHIBIT 7. PERFORMANCE EXCELLENCE ELEMENTS LINKED TO can be characterized as follows: employees
are (for the most part) extremely well informed
ORGANIZATIONAL PERFORMANCE and when asked about topics that pertain to
the operational effectiveness of the organiza-
Major Element References
tion will supply observations that, if acted
Borucki & Burke, 1999; Chuang & Liao, 2010; Dietz, Pugh & Wiley, 2004; upon, will identify a path forward for organi-
Grizzle, Zablah, Brown, Mowen & Lee, 2009; Hartnell, Ou & Kinicki, 2011; zational improvement. The research conducted
Customer orientaBon Johnson, 1996; Liao & Chuang, 2004; Pugh, Dietz, Wiley & Brooks, 2002;
Schneider, Ehrhart, Mayer, Saltz & Niles-Jolly, 2005; Schneider, Macey, Lee &
from this perspective produced the perfor-
Young, 2009; Susskind, Kacmar & Borchgrevink, 2003 mance excellence construct. Depending upon
the segment of the marketplace in which a
Borucki & Burke, 1999; Liao & Chuang, 2004; Pugh, Dietz, Wiley & Brooks, particular organization operates, the construct
Quality emphasis 2002; Ramayah, Samat & Lo, 2011; Schneider, White & Paul, 1998; Susskind,
Kacmar & Borchgrevink, 2003
may alternatively be labelled as service excel-
lence, customer centricity, climate for
Training
Johnson, 1996; Liao & Chuang, 2004; Milia & Birdi, 2010; Pugh, Dietz, Wiley & service or even performance enablement.
Brooks, 2002; Wang & Shieh, 2008

Bu`s, Vandenberg, DeJoy, Schaer & Wilson, 2009; Liao & Chuang, 2004; The construct is defined as follows: Perfor-
Involvement O'Neill, Feldman, Vandenberg, DeJoy & Wilson, 2011; Riordan, Vandenberg & mance excellence is the extent to which an
Richardson, 2005 organization is strongly committed to high levels
of customer service and product quality and
relies upon continuous improvement practices
to achieve superior organizational results. The
definition makes obvious that performance
EXHIBIT 8. PERFORMANCE EXCELLENCE excellence is about product quality and cus-
ITEM LEVEL ANALYSIS tomer service in the context of a continuous
80 improvement of the work environment.

70 That this definition and perspective aligns with

60
67
65 64
published research is demonstrated by the
60 60 60 results provided in Exhibit 7. This table sum-
Percent Favorable

55
50 marizes recently published studies which
48 explore relationships between individual com-
40
ponents of the performance excellence
30 construct and various measures of organiza-
tional performance. From all of these studies,
20
the components of the performance excellence
10 index are easily identified: customer orientation,
quality emphasis, training and involvement.
0
Performance Quality Clear Co-workers Customer Customer Receive ParBcipaBve
Excellence commitment quality cooperate problems feedback needed decision Accordingly, the individual items comprising the
Index Score standards corrected used training making
Performance Excellence Index, also measured
on a balanced five-point Likert agreement scale,
are:

42 PEOPLE & STRATEGY

 EXHIBIT 9. PERFORMANCE EXHIBIT 10. PERFORMANCE
EXCELLENCE AND CUSTOMER EXCELLENCE AND DILUTED
SATISFACTION EARNINGS PER SHARE
4 2
American Customer Sa7sfac7on Index

3
3.2 1.5

Diluted Earnings Per Share

2 1

0 0

-1

-2 -1 -1.3
-3
-3.7
-4 -2
Top 25% of BoAom 25% of Top 25% of BoAom 25% of
Organiza7ons Organiza7ons Organiza7ons Organiza7ons
on Performance on Performance on Performance on Performance
Excellence Excellence Excellence Excellence

Note: One-tailed Pearson correla7on, Note: One-tailed Pearson correla7on,

r=.35, p<.01, n=63, all values are mean centered r=.20, p<.01, n=168 all values are mean centered

EXHIBIT 11. PERFORMANCE EXHIBIT 12. PERFORMANCE

EXCELLENCE AND SHAREHOLDER EXCELLENCE AND
RETURN RETURN-ON-ASSETS
4 2
Three-year Total Shareholder Retrun

3 1.7
3.2
2
1
Return-On-Assets

0
0
-1

-2
-1
-3
-1.5
-4 -4.3

-5 -2
Top 25% of BoAom 25% of Top 25% of BoAom 25% of
Organiza7ons Organiza7ons Organiza7ons Organiza7ons
on Performance on Performance on Performance on Performance
Excellence Excellence Excellence Excellence

Note: One-tailed Pearson correla7on, Note: One-tailed Pearson correla7on,

r=.17, p<.02, n=187, all values are mean centered r=.18, p<.01, n=203, all values are mean centered

VOLUME 36/ISSUE 4 2014 43


It is clear that employees evaluate various items
within the index quite differently. By far, employees
provide the most favorable ratings for items measuring
senior management commitment to high-quality
products and services and the setting of clear
performance standards for product and service quality.
Customer problems get corrected quickly
(Customer Orientation).
We regularly use customer feedback to im-
prove our work processes (Customer Orienta-
tion).
Senior management is committed to providing
high-quality products and services to external
customers (Quality Emphasis).
Where I work, we set clear performance stan-
dards for product/service quality (Quality Em-
phasis).
Where I work, employees are getting the train-
ing and development needed to keep up with
customer demands (Training).
In my company, employees are encouraged
to participate in making decisions that affect
their work (Involvement).
The people I work with cooperate to get the
job done (Teamwork).
Teamwork, referenced in the final item listed
above, is not one of the primary components
displayed in Exhibit 7. Even so, it is proposed
that there is sufficient research support for its
inclusion in the index (Pugh, Dietz, Wiley, &
Brooks, 2002; Mayer, Ehrhart, & Schneider,
2009; Chaung & Liao, 2010).
The Performance Excellence Index is typically
reported as percent favorable, that is, the aver-
age level of agreement across the seven items.
Performance Excellence Index coefficient
alpha, an internal consistency estimate of reli-
ability, is high at .86 (Kenexa Research Institute
WorkTrends Report, 2009).
Global Performance Excellence Index and item
level results are shown in Exhibit 8. The global
Performance Excellence Index score is 60%,
only slightly above the global Employee Engage-
ment Index score of 58%. It is clear that
employees evaluate various items within the
index quite differently. By far, employees provide
the most favorable ratings for items measuring
44 PEOPLE & STRATEGY
senior management commitment to high-quali-
ty products and services and the setting of clear
performance standards for product and service
quality. By contrast, employees provide the least
favorable ratings for participative decision mak-
ing and receiving the training needed to keep up
with customer demands. Clearly, employees
are making a distinction between the articulation
of a quality commitment and the work-a-day
realities of employee training and involve- comparing the size of the respective cor-
ment.
Performance Excellence and
Business Performance
This article has now established that the
Performance Excellence Index has high
internal consistency reliability and shows
significant differentiation among the items
comprising the Index, but two further ques-
tions emerge: does the index correlate
significantly with business performance
and, if so, how does the strength of that rela-
tionship c ompare to the strength of
the relationship between the Employee
Engagement Index and business perfor-
mance? To answer these questions the
same research methodology utilized to vali-
date the Employee Engagement Index as a
predictor of business performance was
adopted. To validate that the performance
excellence construct significantly relates to
measures of business success, Perfor-
mance Excellence Index scores were
correlated with:
1. American Customer Satisfaction Index
(ACSI) scores for 63 companies
2. Diluted Earnings per Share (DEPS) for
168 companies
3. Return-on-Assets (R-O-A) for 203 com-
panies
4. Three-year Total Shareholder Return
(3TSR) for 187 companies
Exhibits 9-12 graphically depict the rela-
tionships bet ween the Per for manc e
Excellence Index and various measures of
business performance. All statistical rela-
tionships are as expected: positive and
significant. Clearly, those organizations in
the top quartile of Performance Excellence
Index scores outperform bottom quartile
Performance Excellence Index organiza-
tions by substantial margins.
As noted before, while these results are
correlational and conclusions about cau-
sality cannot be asserted, they demonstrate
that organizations with leadership practices
that stress customer orientation, quality
emphasis, employee training and employ-
ee involvement in decision making are
those organizations that enjoy significantly
higher levels of success as measured by
the satisfaction of their customers, the
earnings they deliver to shareholders (in
both immediate and mid-term timeframes)
and return on assets. Additionally, from
relation coefficients, it can be concluded
that the Performance Excellence Index is a
stronger correlate of customer satisfaction
than the Employee Engagement Index, but
that the Employee Engagement Index and
Performance Excellence Index are compa-
rable in strength as correlates of the other
performance measures. The note of cau-
tion mentioned above applies here as well:
the 2009-2010 period contained dramatic
economic challenges that may affect the
relationship between PEI and outcome
measures and further time analyses would
enhance our understanding of the nature of
these relationships. However, the unusu-
ally large sample size provides a significant
degree of confidence in the results.
The High Performance-
Engagement Model 1.5
Employee engagement and performance
excellence are two different constructs, but
both are obviously amenable to measure-
ment through a well-designed employee
survey instrument.
The High Performance-Engagement Model
is presented in Exhibit 13. According to this
model, when leaders support both perfor-
mance excellence and employee
engagement, organizational performance is
at its highest. Past research (see Exhibits 2
and 7) that outlines the leadership require-
ments to build both a high performance
organization and an engaged workforce has
 Employee Engagement Index mean scores
by .25 corresponds to: 1) a 2.76-point
EXHIBIT
13.
THE
HIGH
PERFORMANCE
ENGAGEMENT
MODEL
increase in their American Customer Satis-
faction Index score; 2) an increase of $1.05
Complementary
Leadership
Organiza3onal

Goals
Requirements

Key
Indicators

Impact
in diluted earnings per share; 3) a 2.82-per-
centage point increase in three-year total

shareholder return; and 4) a 1.18-percent-
Team
Performance

High
Performance
Prac3ces
Suppor3ng:
age point increase in return-on-assets.
Organiza.on
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Customer
Orienta.on

Quality
Emphasis
Performance
Service
Quality

Loyal
customers
likely
to
Training
Excellence
Index


--
-
-
-
-
-
-
-
-
-
-
-
-
-
Regardless of the business performance
recommend/re-purchase
Customer
Loyalty

Involvement

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

outcome under consideration, this analysis
Business
Growth
shows that performance excellence accounts
Engaged
Behaviors
Reinforcing:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
for more of the variance in business perfor-
Market
Share

Workforce
Condence
and
Trust

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

mance than does employee engagement.
Recogni.on
and
Respect
Employee

Employees
willing
to
apply
Growth
and
Development
Engagement
Index

Prot
This is especially true with regard to cus-
discre9onary
eort
Exci.ng
Work
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
tomer satisfaction. Even so, these results
Shareholder
Return

inform us that leaders and managers should
work to improve both indexes in tandem as
Measurable
by
Employee
Survey
System

Measurable
by
a path to stronger business performance. In
Performance

Systems

fact, organizations focusing on just one of
these constructs alone run the risk of sub-
optimizing, failing to grasp opportunities to
been integrated. The model suggests that Hypothesis: The combination of the Perfor- impact positively their effectiveness both in
the effects of performance excellence and mance Excellence Index and the Employee serving their customers and in delivering
employee engagement are complementary, Engagement Index better predicts business superior results to their financial stakeholders.
additive and combine synergistically to performance than either index alone.
unleash workforce energy to further drive
overall business performance. The analysis quantified the impact of three A Case Study
conditions: increasing the Performance One of the early-adopters of the High Perfor-
Molded together, performance excellence Excellence Index mean score by .25 (on a mance-Engagement Model is a privately-held
and employee engagement reflect a two- five-point Likert rating scale), increasing the supermarket chain headquartered in the
dimensional model of organization Employee Engagement Index mean score by United States, operating over 300 stores and
effectiveness, reminiscent of earlier two- the same margin and finally, increasing con- listed as one of the nations top 25 retailers.
dimensional models of leadership and comitantly the mean scores of both indexes
managerial effectiveness (Katz & Kahn, by .25. The results are presented in Exhibit In the pilot survey, Performance Excellence
1952; Fleishman, 1953; Halpin & Winer, 14. Index and Employee Engagement Index
1957; Likert, 1961; Stogdill, Goode, & Day, scores were correlated to measures of
1962; Likert, 1967). These earlier models The conclusions are that, for the companies same-store income growth as way of testing
differentiate between task orientation and studied, the impact of increasing both their the models assertions. The results are pre-
person orientation (Michigan studies) and Performance Excellence Index and the sented in Exhibit 15.
initiating structure and consideration (Ohio
State studies). The same is true with the High
Performance-Engagement Model. One con- EXHIBIT
14.
PERFORMANCE
EXCELLENCE
INDEX
AND
EMPLOYEE

struct is performance-centric while the other
is employee-centric. Both show substantial ENGAGEMENT
INDEX
INCREASES
AND
BUSINESS
PERFORMANCE

relationships to outcomes that are of tremen- Business
metric
gains
associated
with
concomitant
.25
increases
in
the


dous importance to a firms executives and Performance
Excellence
and
Employee
Engagement
Indexes

financial stakeholders. Together they pro-
Gain
=
2.76
pts
Gain
=
$1.05
Gain
=
2.82%
Gain
=
1.18%

vide, in the balanced scorecard framework,
very potent leading indicators of organiza-
tional success (Wang, Tsui, & Xin, 2011). 58%
54%

74%
68%

Is the High Performance-

46%
Engagement Model a Valid Model 26% 32%
42%

of Organization Effectiveness?
American Customer Diluted Earnings Three-Year Total Return on Assets
The same database described above was Sa.sfac.on Index Per Share Shareholder Return
used to validate the model. The models main
hypothesis was the subject of a new analy- Employee
Business MEetric
ngagement Index
Gain A`ributable Performance Excellence
Business Metric Index
Gain A`ributable
sis. to Performance Excellence to Employee Engagement

VOLUME 36/ISSUE 4 2014 45

 for these stores are 0.97% inventory shrink-
EXHIBIT 15. PERFORMANCE EXCELLENCE + EMPLOYEE age equating to a monetary value of
ENGAGEMENT AND STORE NET INCOME US$4.3m. Said differently, if the low scoring
0.20% stores could improve their index scores to
the level of the high scoring stores, the pro-
Quarterly Store Net Income Variance

0.10% $329K $318K $346K

jected savings would equal US$2.6m.

0.00%

-0.10%
Next Steps
-0.20%

-0.30% -$270K
-$215K
The goal of this article is to demonstrate the
validity of integrating two disparate streams
-0.40%
-$465K of historical research into one coherent
-0.50% model. The analyses presented are drawn
-0.60% from extremely large international databases
Performance Employee Performance Excellence + representing virtually all major industry
Excellence Index Engagement Index Employee Engagement groups; this provides an extra measure of
High Index Stores Low Index Stores confidence in the conclusions presented.
Even so, there are some desirable next steps
The results support the main hypotheses of Exhibit 16, six-month shrinkage for stores in research focused on the intersection of
the model, namely, that both the Perfor- that are simultaneously high on both the Per- employee surveys and their linkages to orga-
mance Excellence Index and Employee formance Excellence Index and the nizational performance. Most important is
Engagement Index are related to organiza- Employee Engagement Index are compared the use of time series designs to shed light
tional performance, but the combination of with stores that are simultaneously low on
on causality, allowing us to move beyond the
the two more fully explains performance than both indexes.
mere reporting of an association between
either measure alone. Among stores with the
highest scores on both the Performance While shrinkage occurs in both types of employee opinions and organizational per-
Excellence Index and the Employee Engage- stores, shrinkage is much higher (a more formance. Future research should also
ment Index, net income improved over the negative outcome) in stores that are low on consider additional organizational design
previous quarter. More dramatically, among both the Performance Excellence Index and variables, e.g., support for innovation and
stores with the lowest scores on both the the Employee Engagement Index. In low- utilization of technology as pathways to suc-
Performance Excellence Index and Employ- scoring stores inventory shrinkage was cess. These analyses would add further
ee Engagement Index, net income declined. 1.28%, which equates to monetary value of
value by also establishing the relative contri-
In actual value, this equates to a difference US$6.9m. On the other hand, in stores high
on both the Performance Excellence Index butions of these variables to our
in performance between top and bottom Per-
formance Excellence Index + Employee and the Employee Engagement Index, understanding of organizational perfor-
Engagement Index stores of over US$800k inventory shrinkage was much lower (a more m a n c e i n th e c o n te x t o f e m p l o y e e
in quarterly net income. As clearly seen, this positive outcome). The comparable statistics engagement surveys.
gap is notably wider than the gaps between
top and bottom scoring Performance Excel-
lence Index stores and top and bottom EXHIBIT 16. PERFORMANCE EXCELLENCE + EMPLOYEE
scoring Employee Engagement Index stores. ENGAGEMENT AND STORE SHRINK
The conclusion is simple: store managers $8.0
can improve their stores by focusing on
improving either Performance Excellence $7.0
$6.9 m
Index or Employee Engagement Index
Store Shrink (in millions)

$6.0
scores, but they can improve their stores
even more by focusing on improving both. $5.0

$4.0 $4.3 m
Following the pilot, the High Performance-
Engagement Model survey instrument was $3.0
implemented across the entire chain of
similarly-branded supermarkets. This $2.0

allowed testing of the model against another $1.0

performance outcome: reduced shrinkage.
Shrinkage in the retail industry context refers $0.0
to inventory damages, theft and loss (Sack- Top 25% Performance Excellence Index + Bo`om 25% Performance Excellence Index +
Employee Engagement Index Stores Employee Engagement Index Stores
ett & Harris, 1984), and thus is an extremely
important measure of store productivity. In

46 PEOPLE & STRATEGY

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Appendix 1: Description of
WorkTrends Database
The WorkTrends survey provides much of the data from which
these findings are drawn.WorkTrends is a research program begun
under the direction of the author in 1984.Originally, WorkTrends was
administered only in the United States. In 2007, the survey program
expanded to include several additional countries.In its current form,
WorkTrends is a multi-topic survey completed online by a sample of
workers screened to match a countrys worker population in terms of
industry mix, job type, gender, age and other key organizational and
demographic variables. Those who work full-time in organizations of
100 employees or more are allowed to take the survey.The survey
has over 115 items that cover a wide range of workplace issues. In
2009, approximately 10,000 workers in the United States, 750 in
Russia and 1,000 in all other listed countries completed the survey:
Brazil, Canada, China, France, Germany, India, Italy, Japan, Spain
and the United Kingdom. Altogether, 21,290 employees were sur-
veyed in 2009. The 2009 WorkTrends database was utilized for the
linkage research analyses described in this paper.
In 2010, approximately 10,000 workers in the United States, and
1,000 individuals each in each of the following countries/regions
completed the WorkTrends survey: Australia, Brazil, Canada, China,
Denmark, Finland, France, Germany, India, Italy, Japan, Mexico, The
Netherlands, Russia, Spain, Sweden, Switzerland, the United King-
dom and select countries in the Gulf Co-Operative Council States,
namely Saudi Arabia and the United Arab Emirates and Qatar. Alto-
gether, 29,338 employees were surveyed in 2010. The 2010
WorkTrends database was utilized for the discussion of employee
engagement and its drivers and for the discussion introducing the
performance excellence construct. For the employee engagement
drivers analysis, a representative sub-sample of 1,000 US workers
was drawn to equalize the impact of the US data on the determination
of employee engagement drivers.
Dr. Jack W. Wiley is Professor of Psychology at Manchester Uni-
versity and former president of the High Performance Institute
by Kenexa, an IBM Company. He is recognized internationally
for groundbreaking research that links employee survey results
to measures of customer satisfaction and business performance.
VOLUME 36/ISSUE 4 2014 49
Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.