the impact of effective leadership on employee engagement

The Impact of Effective Leadership on Employee Engagement

Jack W. Wiley

© 2010 Wiley Periodicals, Inc.Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20297

In both good times and bad, how can organi-zations boost employee confidence and keep

performance from wavering? Smart compa-nies focus on fostering a culture of engagedemployees. Visionary leaders who create aculture of engagement maintain employeetrust, drive optimal levels of productivity,increase overall satisfaction and retention, andare able to position the company for success.A critical element in building confidence,motivating performance, and increasingemployee engagement is having people at thetop who inspire belief in the organization’sfuture. When done effectively, organizationsexperience better business success andstronger bottom-line business performance.

To understand the impact of executiveinfluence, think about how employeesrespond when times get tough: they’re anx-ious, fearful, and worried about their future.It is in these times that employees look toorganizational leaders for guidance. How theycommunicate and whether their actions alignwith what they say sends a strong message toemployees and helps drive the perception ofeffective leaders. When times are good, hon-est communication from those at the helmcreates loyalty and organizational pride,ensuring companies retain top performers.

Leadership effectiveness can be definedby five characteristics: (1) the ability to giveemployees a clear picture of the direction thecompany is headed; (2) the ability to handle

the organization’s challenges; (3) a genuinecommitment to providing high-quality prod-ucts and services; (4) a demonstrated beliefthat employees are important to companysuccess; and (5) the ability to inspire confi-dence in employees.

According to the latest research from theKenexa Research Institute (KRI), an organiza-tion’s senior leadership team has a signifi-cant impact on its employees’ overall opin-ions of the company and engagement levels,which have been linked to both earnings pershare and total shareholder return. The datacome from an analysis of the 2010 Work-Trends™ database, an annual survey ofworker opinions conducted by KRI.

The WorkTrends survey asks employees torate their organization on items such as “I amproud to tell people I work for my organiza-tion”; “I am extremely satisfied with my organi-zation as a place to work”; “I would recom-mend my organization to others as a good placeto work”; and “I rarely think about looking fora new job with another company.” These fouritems are used as measures for the EmployeeEngagement Index (EEI), typically reported aspercent favorable—that is, the average level ofagreement across the four items.

Employee engagement is a means to anend. That is, organizations that want to drivehigh levels of business success need motivatedand engaged employees to get there. To giverise to higher levels of employee engagement,

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companies need to ensure that leaders areempowered to build a culture of employeeswho are motivated to achieve business goals.By understanding what drives employeeengagement, organizations can then leveragethat upwardly and generate greater levels ofproductivity, lower absenteeism, deliver high-quality customer service, and drive top-linebusiness performance and profitability.

THE DRIVERS OF EMPLOYEE ENGAGEMENT

Employee engagement—the extent to whichemployees are motivated to contribute to organi-zational success, and are willing to demon-strate commitment, loyalty, and a willingnessto go beyond basic requirements to accomplish

tasks and organizational goals—is critical forbusiness success. However, nurturing a moti-vated workforce in the face of challengingeconomic times that include downsizing, fur-loughs, and salary reductions creates newchallenges. With reduced resources and grimeconomic pressures, leaders are still expectedto motivate high levels of performance. Inprosperous times, it is equally essential tomaintain high levels of engagement to retainthe company’s best talent.

In periods of turbulence and change aswell as in times of economic growth, leaderswho understand what drives employee en-gagement can build a workforce that is moti-vated to perform. Conversely, how employeesview company leadership can have a significant

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impact on their engagement level and overallviews of the company.

To drive higher levels of engagement, it isimportant to first understand the behaviorsthat support employee engagement:

❏ Leaders must inspire confidence in the futureof the organization. The Bureau of LaborStatistics projects a shortfall of 10 millionworkers in the United States by this yearand a slowdown in the labor force growthrate through 2018.1 As organizationsrequire more work from fewer people, it’simperative to have leaders who can moti-vate remaining employees to performtheir best. Leaders who minimize uncer-tainty by securing employees’ perceptionsof the organization’s future, and supportthe belief that there is a future for theemployees, will be able to drive higherlevels of engagement.

❏ Managers must demonstrate respect andrecognition for their employees. Employeerecognition is a critical component ofachieving higher levels of engagement.Having reinforcement from managers andothers whom employees hold in highregard is essential. People like to beappreciated, acknowledged, and respectedand know that their efforts are making adifference for their organization. Man-agers need to understand that recognizingemployees for their contributions is morethan just nice to do—it is an imperative.In addition to receiving praise for a jobwell done, employees want to know thattheir opinions are valued, that they haveinput into decisions, and that even whenthey make mistakes, they can count onthe support and respect of their managers.

❏ Individuals must have a job that is interest-ing and exciting to them. Management and

To give rise to higher levels of employeeengagement, companies need to ensure thatleaders are empowered to build a culture ofemployees who are motivated to achieve business goals.

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leadership play a significant role inemployee engagement, but it’s equallyimportant for employees to have enthusi-asm for the work that they do. Beyondmastering the job’s tasks, employees needto feel pride in what is being accom-plished and share in the excitement whengoals are achieved. The more employeesfeel they are building their own skill setsand feel competent and in control of theirwork product, the more likely they are todemonstrate high levels of engagement.

❏ The organization must demonstrate genuineconcern for employees and the communitiesin which they operate. In addition to feelingrespected and recognized for their contri-butions, engaged employees value work-ing for an organization that is committedto serving others. When workers feel theirorganization is committed to its employ-ees’ livelihood and community, throughboth support of an employee’s work/lifebalance as well as through corporateresponsibility efforts, engagement levelsincrease. For employees to care about itsorganization’s mission, they need to feelthat the sentiment is reciprocal.

When leaders understand the pillars ofengagement, they can then begin to leverageemployee engagement for positive organiza-tional outcomes such as higher employeeretention, greater customer satisfaction, andimproved financial performance.

WHAT CAUSES EMPLOYEES TO SEELEADERS AS EFFECTIVE?

Not surprisingly, an organization’s success isfundamentally tied to the skills and actions ofits leadership. By understanding the fundamen-tals of employee engagement, organizations can

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then begin to shape and reinforce leadershippractices and behaviors that support high levelsof engagement to create high-achieving work-forces.

New research from KRI’s WorkTrends sur-vey program examines what causes employ-ees to view their leaders as effective. TheWorkTrends database is derived from anannual survey of worker opinions conductedby KRI and surveys the largest economies inthe world (by gross domestic product) to lookat the drivers of employee engagement.

In 2010, approximately 10,000 workers inthe United States and 1,000 workers in eachof the following countries/regions took theWorkTrends survey online: Australia, Brazil,

Canada, China, Denmark, Finland, France,Germany, India, Italy, Japan, Mexico, theNetherlands, Russia, Spain, Sweden, Switzer-land, and the United Kingdom. The GulfCooperation Council (GCC) countries of theMiddle East were also surveyed to a lesserextent due to surveying limitations in thatregion of the world. The GCC countriesinclude Saudi Arabia, the United Arab Emi-rates, and Qatar. Altogether, 29,338 employ-ees were surveyed in 2010.

WorkTrends is a multitopic survey com-pleted online by a sample of workersscreened to match a country’s worker popula-tion in terms of industry mix, job type, gen-der, age, and other key organizational anddemographic variables. Those who work

In addition to receiving praise for a job welldone, employees want to know that their opin-ions are valued, that they have input into deci-sions, and that even when they make mistakes,they can count on the support and respect oftheir managers.

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full-time in organizations of 100 employees ormore are allowed to take the survey. The sur-vey has 115 items that cover a wide range ofworkplace issues.

The latest results indicate that the globalrating of senior leadership effectiveness is 55percent. Employees in India (72 percent),China (71 percent), and Switzerland (63 per-cent) report the highest ratings of leadershipeffectiveness; much lower ratings are pro-vided by employees in France, Italy, theUnited Kingdom, and Finland (47 percent).Workers in Japan (35 percent) reported thelowest ratings. The U.S. rating of senior lead-ership effectiveness is 56 percent.

For all workers studied, a strong organiza-tional leadership team has a significantimpact on its employees’ engagement levels.As noted earlier, an organization’s success isdependent on the skills and actions of itsleadership. That’s why organizations need toensure that its leaders are committed to driv-ing high levels of employee engagement.

So what drives the perceptions of effectiveleaders? Consider the following:

❏ Leaders who are nimble and innovative anddemonstrate a sense of urgency are likely tobe viewed as effective. Effective leadersneed to demonstrate that they are quickto respond to threats, abreast of newtrends that are disrupting or drivingchange, open to new technologies, andable to influence others. French soldierand statesman Charles DeGaulle said,


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“Men are of no importance. What countsis who commands.” When it comes toemployee engagement, he is only half cor-rect. Employees are of utmost importanceto drive business success, but it is theleadership that helps to encourageemployee performance. Leaders who candemonstrate the ability to innovate andrespond to change are likely to be per-ceived as effective leaders. As a result,they can affect business results.

❏ Effective leaders recognize quality customerservice as a key component of customer satis-faction, retention, and financial growth.Senior management needs to demonstratethat they are committed to providing high-quality products and services, employeetraining, and supporting employee in-volvement in decision making. Going theextra mile at every interaction and everyopportunity influences employee percep-tion. Leaders with a sharp focus on cus-tomer service show that they are dedi-cated to high performance standards, careabout the communities they serve, andunderstand that the target of business is a satisfied customer. When leadershipdemonstrates a commitment to being thebest, they are able to inspire employees toachieve the same goal, and organizationalperformance improves.

❏ Giving employees a clear picture of the direc-tion in which the company is headed reducesuncertainty and helps employees find mean-ing in the work they do. Trustworthiness,integrity, and the ability to communicatetruthfully are critical for leaders whowant to drive engagement and motivateperformance. Regular ongoing and two-way communication is essential for boost-ing confidence in leadership. Leadersneed to acknowledge the truth about the

Effective leaders need to demonstrate that theyare quick to respond to threats, abreast of newtrends that are disrupting or driving change,open to new technologies, and able to influenceothers.

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current state of affairs and articulate avision for the future. As the old adagesays, actions speak louder than words.Leaders who want to motivate othersneed to do what they say they’re going todo, communicate on progress, and holdthemselves and the executives who reportto them accountable. Research hasunequivocally demonstrated that the moreleadership inspires trust and confidence inthe future, and the more managers recog-nize and respect employees, ensure thatpeople are growing and developing, andmatch employees to their work, the higherthe employee engagement.

❏ Leaders need to address a diverse audienceand recognize multistakeholders. To inspireconfidence in employees, leaders mustshow they are also interested in cus-tomers, suppliers, and business partners,and not just the financial stakeholders ofthe enterprise. Embracing feedback fromeach contingency, being accountable, andresponding appropriately requires a strongcommitment. There is, however, a payoff.A multistakeholder approach ensures acommon understanding of a shared goal,and by understanding how decisionsaffect others, leaders can create commit-ment from employees, customers, andeven among the community and society asa whole, as well as from investors.

❏ Employees have confidence in leaders whodefine clear expectations and hold managersand others accountable for their actions.Employees are well informed and under-stand how their companies’ products andservices are perceived in the marketplace.To drive higher levels of engagement, themessage from leadership needs to be oneof responsibility and accountability.Employees who understand where they

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are expected to focus their time andenergy are more likely to achieve desiredresults. Part of creating a culture ofaccountability also means creating anenvironment where employees arerewarded for their contributions—and tak-ing action when employees fall short ofexpectations. Having a strong monitoringand feedback mechanism to measureresults is also important to help employ-ees understand where they need to makeadjustments.

One of the world’s largest optical retailersattributes a tremendous amount of its successto how it manages its workforce. The com-pany’s leaders have embraced the management

principle that success is contingent on howthey lead employees at all levels of the orga-nization. The leadership team has a clearlyarticulated value system and consistentlymeasures the extent to which they are operat-ing in accordance with those values on anannual basis. They share results with all theirassociates and regularly identify a few areaswhere they can make improvements. Theyalso keep associates updated on the causes ofproblems in those areas and what the solu-tion is going to be. Over the course of time,their scores have shown continuous improve-ment, thus helping to secure their number-one position in the marketplace.

Research has unequivocally demonstrated thatthe more leadership inspires trust and confi-dence in the future, and the more managers rec-ognize and respect employees, ensure that peo-ple are growing and developing, and matchemployees to their work, the higher theemployee engagement.

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EMPLOYEE CONFIDENCE IS KEY

Perhaps the most critical element in employeeengagement is ensuring employee confidencein leadership and the organization. Tips forinspiring confidence include the following:

❏ Be visible to employees and “walk the talk.”How leaders “show up” to work is extremelyimportant. Don’t make employees playguessing games. Instead, communicateclearly and let them know what is ex-pected of them. In addition to clear ver-bal communication, make sure nonverballanguage is transparent. By operating withno surprises, employees are able to oper-ate with confidence and clarity.

❏ Be truthful about the current state of affairs.Great leaders inspire trust by being truthful.Creating a culture of candor—even if it isnot easy—is important. Have integrity inwhat you say and do. A leader should behonest in assessment, have clarity around aplan to move the business forward, and beable to communicate confidence in the plan.

❏ Communicate on progress. To enhance lead-ership, be ready to communicate both


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successes and failures. Work is no placefor snow jobs. Ongoing communicationand regular feedback are critical forimproving performance. Recognizeemployees for stellar performance and pro-vide coaching in areas for improvement.

❏ Hold executives accountable. Executivesmake decisions that affect the company’sperformance. Break down communicationbarriers, and let executives know that theyneed to remain engaged in how things getdone. Ensure that information is free flow-ing throughout the organization. To instillconfidence, executives need to be account-able for their actions as well as the results.

❏ Encourage upward communication. Createopportunities for dialogue with lower-levelmanagers and employees. This can beaccomplished through informal lunch discussions, town-hall meetings, and otherways aimed at increasing visibility. Youwill find the ideas and input received arewell worth the effort invested.

NOTE

1. Bureau of Labor Statistics, Employment Projections2008–2018 Summary, December 2009.

Jack W. Wiley, PhD, is founder and executive director of the Kenexa Research Institute.Dr. Wiley is recognized internationally for groundbreaking research that links employee sur-vey results to measures of customer satisfaction and business performance. He is also the cre-ator of WorkTrends, an international survey research program that produces results featuredin both scholarly studies and the popular press worldwide. He has more than 30 years ofexperience consulting with organizations in the health care, financial services, manufacturing,and retail industries. He has written several articles and book chapters and has made numer-ous presentations to professional associations around the world. He is a licensed consultingpsychologist, was elected as a fellow in the Society for Industrial and Organizational Psychol-ogy and the American Psychological Association, and serves on the board of directors of theHuman Resources Planning Society. Prior to joining Kenexa in 2006, he was the founder andCEO of Gantz Wiley Research, a survey research consulting firm specializing in employee andcustomer surveys for corporate clients. He may be reached at [email protected].

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the impact of effective leadership on employee engagement

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