We know for certain that employee engagement and positive business outcomes are correlated, but does engagement truly lead to better outcomes, or do successful companies just have more engaged employees? Or does the linkage work in both directions?
It’s the old chicken-or-the-egg question, or as statisticians like to remind us, “correlation is not necessarily causation.”
I’ve tracked over 30 studies that show how engagement correlates to decreases in absenteeism, turnover, accidents, and defects, while it also correlates to increases customer service, productivity, sales, and profits. The suggested causality is that engagement—the emotional commitment one has to their organization and its goals—drives higher levels of discretionary effort. You can see the theoretical linkages in my simplified diagram of what I call the Engagement-Profit Chain.
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Despite the impressive literature showing correlation between engagement and business outcomes, there is far less research showing causality. Many still wonder, “Maybe employees are just more engaged when their companies are growing, bonuses are big, and stock prices are climbing.”
However, an important study published in the Journal of Occupational and Organizational Psychology shows convincingly that, indeed, organizational commitment has more impact on business unit performance than vice versa. Researchers Silvan Winkler, Cornelius König and Martin Kleinmann used both a longitudinal design and looked at the organizational commitment of 755 retail bank employees from 2005—2008, along with financial performance and customer satisfaction of the business units they worked in. The study showed that indeed there is a reciprocal relationship between job attitudes and business performance within a one-year time frame, but when the time frame is increased to two or three years the correlation only remained in the direction of engagement preceding business outcomes. They write:
Results indicated that organizational commitment had a more persistent influence on performance at the business unit level than vice versa. Consistent with prior research, this suggests that job attitudes may come first, and that practitioners might be well advised to aim to improve job attitudes in order to boost performance.
In addition to showing causation, this study looked at the size of the effect (i.e., the strength of engagement) on customer satisfaction. Using a binomial effect size display for the link between engagement and subsequent customer satisfaction the findings were r = .43.
To put this effect size into perspective for everyday practitioners, it can be compared to the effect sizes of many drugs as reported in the journal, American Psychologist:
- Chemotherapy and breast cancer survival: r = .03
- Antibiotics and the cure for pediatric ear pain: r = .08
- Smoking and incidence of lung cancer within 25 years: r = .08
- Effect of ibuprofen on pain reduction: r = .14
- Alcohol and aggressive behavior: r = .23
- Sleeping pills and improvement in insomnia: r = .30
- Viagra and improved male sexual functioning: r = .38
- Employee engagement and customer satisfaction: r = .43
Indeed, the authors make a direct comparison, “the correlation between male consumption of Viagra and sexual performance has been calculated to be r = .38…which is similar to the relationship between employee commitment and subsequent 1-year customer satisfaction.”
The research continues to support the argument that an investment in employee engagement initiatives can lead to improved business outcomes.
