ENDORSING EMPLOYEE ENGAGEMENT THROUGH HUMAN CAPITAL APPROACH.pdf

2010

Social Responsibility, Professional Ethics, and Management

Proceedings of the 11th International Conference

Ankara, Turkey, 24–27 November 2010

ENDORSING EMPLOYEE ENGAGEMENT THROUGH HUMAN

CAPITAL APPROACH. AN EMPIRICAL RESEARCH

Hary Febriansyah, University of Innsbruck, Austria

Hary.Febriansyah@uibk.ac.at

ABSTRACT

Giving a special treatment for employees in order to develop competences and engagement

are still significant problem in human resources management in the developing countries. To

counter those problems, researchers and practices have been implementing human capital

and employee engagement approach. This paper elaborates the employee engagement

factors. We share 1274 questionnaires as primary data in which respondents are management

and operational staffs. Moreover, we use quantitative method in factor analysis, to analyze all

the information. The findings are employee engagement can be endorsed by current career

intention, equal opportunity and fair treatment, and communication. We are using human

capital approach to analyze the findings. Further from this research, we offer a platform to

develop strategies in employee engagement.

Keywords: Human capital, employee engagement, current career intention, equal

opportunity and fair treatment, and communication

INTRODUCTION

Today, society and business are witnessing unprecedented change in an increasingly global

market place; with many companies competing for talent people who are have high

performance and high competence in workplace (Berger & Berger 2004). Almost

organizations in the world are moving forward into a boundaryless environment, the ability to

attract, engage, develop and retain talent will become increasingly important. A boundaryless

environment in organizations are reffering to free movement of ideas, information, decisions,

talent, rewards, and action (Ashkenas et al., 1995). In the new economy, competition is

global, capital is abundant, ideas are developed quickly and cheaply, and people are willing to

change jobs often (Fishman 1998). The company who cannot provide a good treatment for

their employees, will lost their talented people. Employee engagement is becoming a popular

term among human resource management and development consultants, internal

communications practitioners, and business conference presenters and has gained

considerable popularity in the past 20 years yet it remains inconsistently defined and

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2010

Social Responsibility, Professional Ethics, and Management

Proceedings of the 11th International Conference

Ankara, Turkey, 24–27 November 2010

conceptualized. The term employee engagement is seemingly as attractive for organizations as

it is for the professional societies and consulting groups who promote it. The outcomes of

employee engagement are advocated to be exactly what most organizations are seeking:

employees who are more productive in which they can work over the target within working

time, profitable in which they spend the financial usage of company efficiently, safer,

healthier, less likely to turnover, less likely to be absent, and more willing to engage in

discretionary efforts (Buchanan 2004; Fleming&Asplund 2007; Wagner&Harter 2006).

Furthermore, claims have been made that engaged employees average higher customer

satisfaction ratings and generate increased revenue (Vance 2006; Wagner&Harter 2006).

Recent evidence even suggests a direct employee engagement–profit linkage (Ketter 2008). It

is not surprising that corporate executives are consistently ranking the development of an

engaged workforce as an organizational priority (Ketter 2008). Engaged employees have high

levels of energy, are enthusiastic about their work, and they are often fully immersed in their

job so that time flies (Macey&Schneider 2008; May et al 2004). In this study, we are trying to

elaborate the important factors in term of employee engagement. After explorating the factors,

we would like to give a special treatment for increasing their engagement through human

capital management and also developing the competencies of employees.

RESEARCH STUDIES OF EMPLOYEE ENGAGEMENT

The first term of employee engagement stated by Kahn (1990) in his article “Psychological

conditions of personal engagement and disengagement at work”. (Kahn 1990, 700) defined

personal engagement as “the simultaneous employment and expression of a person’s

‘preferred self’ in task behaviors that promote connections to work and to others, personal

presence, and active full role performances” . Day by the day and year by year, many

researchers and practicioners have been interested in to explore more deeper about employee

engagement in an organization. And the latest knowledge about employee engagement,

(Mone&London 2010, 4) state in their book that engagement as a “contruct”. They define

employee engagement is “a condition of employee who feels involved, committed, passionate,

and empowered and demonstrates those feelings in work behavior” . Another term of

engagement is an individual’s sense of purpose and focused energy, evident to others in the

display of personal initiative, adaptability, effort, and persistance directed toward

organizational goals (Macey et.al 2009). Research has shown that the concept of work

engagement can be reliably measured (Schaufeli et al 2007), and that it can be discriminated

from related concepts like workaholism (Schaufeli et al 2004), job involvement, and

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2010

Social Responsibility, Professional Ethics, and Management

Proceedings of the 11th International Conference

Ankara, Turkey, 24–27 November 2010

organizational commitment (Hallberg&Schaufeli 2006). Importantly, recent studies have

indicated that engagement related positively to customer satisfaction (Salanova et al 2005),

in-role performance (Schaufeli et al 2008), and financial returns (Xanthopoulou et al 2008).

On the other hand, HR practitioners believe that the engagement challenge has a lot to do with

how employee feels about the about work experience and how he or she is treated in the

organization (Vazirani 2007). Many employees feel that their working experiences are not

recognized by company fairly. Moreover they will really disapointed when the company

treats them discriminantly in equality of growth, training and development and performance

appraisal. It has a lot to do with emotions which are fundamentally related to drive bottom

line success in a company. There will always be people who never give their best efforts no

matter how hard HR and line managers try to engage them. “But for the most part employees

want to commit to companies because doing so satisfies a powerful and a basic need in

connect with and contribute to something significant”. Benthal (2007) in DDI report said that

engagement is “ to give it their all” and as “the extent to which people enjoy and believe in

that they do and feel valued for doing it” . DDI concludes that employee engagement

constucted by individual value, focused work, and interpersonal support. DDI’s research

concludes that engagement comprises individual value, focused work, and interpersonal

support. Each of these three components has subcomponents that further define the meaning

of engagement:

• Individual Value —Employees feel more engaged when they are able to make a unique

contribution, experience empowerment, and have opportunities for personal growth.

• Focused Work —Employees feel more engaged when they have clear direction,

performance accountability, and an efficient work environment..

• Interpersonal Support —Employees feel more engaged when they work in a safe,

cooperative environment. “Safe,” in this context, means that employees trust one another

and are able to quickly resolve conflicts when they arise.

RESEARCH STUDIES OF HUMAN CAPITAL MANAGEMENT

Theodore Schultz, the winner of Nobel Prize for economics in 1979, originated the term of

human capital: “Consider all human abilities to be either innate or acquired. Every person is

born with a particular set of genes, which determines his innate ability. Attribute of acquired

population quality, which are valuable and can be augmented by appropriate investment, will

be treaded as human capital” (Fitz-enz 2000, 12 in Bruehlman 2005, 11). Human capital is

potentially influenced by the organized infrastructure and physical attributes of the

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2010

Social Responsibility, Professional Ethics, and Management

Proceedings of the 11th International Conference

Ankara, Turkey, 24–27 November 2010

organization in which it resides. Human capital can be different things to different people and

companies (Bruehlman 2005, 11). Salomon (1991) uses human capital to refer to the skills,

knowledge, and abilities of human beings. Human capital theory states that “human capital is

the knowledge and skills (physical and intellectual) that an individual possesses that make

that individual productive workers” (Besanko et al 1996, 641). More and more organizations

are announcing plans to manage their intellectual capital strategically and see the cultivation

and investments in human capital as an opportunity to increase their market position (Bontis

1996). It is necessary to note here that the management of human capital is distinctive from

managing physical assets and that an entirely different skill set is required. In organization

area, the expression of human capital management is defined as “an approach to people

management that threats it as a high-level strategic issue and seeks systematically to analyse,

test and evaluate how people policies and practices create value” (Stiles & Kulvisaechana

2003, 3). Human capital management has attracted an increasing interest over the last ten

years, and taken seriously more higher than conventional human resources management level

(Whitaker & Wilson, 2007). According to Ward (2009), one of generation in human capital

management (HCM) concerned to system integration in business needs through recruiting,

learning, performance, and succession planning.

RESEARCH METHOD

Measurement of employee engagement can have many applications within an organization.

Employee feel engaged when they find personal meaning, high motivation in their work,

receive positive interpersonal support and operate in an efficient work environment (Bernthal

2007). The company in this research is one of Indonesia mining company. We choose it

because this company was willing to be a pioneer of employee engagement research in

cooperation between academician and practical. This company has more than 2400 employees

and its has several branches in all of Indonesia based on type of natural resources. This

country, Indonesia, is very huge in coverage area and number of people, has more than 250

cultures, languages and characteristics. And Indonesia is still have a problem in human capital

development and lack of research on employee engagement. We argue that our result that

could be a representative from all of parts in this company and nation. We believe in that our

result could give a positive contribution on employee engagement in academics and practices

area. The population of this research is all of employee, based on simple random sampling.

This method was used to make an equal opportunity for all employee in measurement (Hair

2007). In order to obtain the data, we deliver 1274 questionnaires for management and

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2010

Social Responsibility, Professional Ethics, and Management

Proceedings of the 11th International Conference

Ankara, Turkey, 24–27 November 2010

operational staffs from September 2009 – February 2010 in all of branches Indonesia. We

develop the questionairres following by dimensions of individual value, interpersonal support

and focused work (Bernthal 2007). The attitude measurement is useful for collecting,

measuring, and analyzing employee opinions. All statements are scored on six-point scale

ranging from one (strongly disagree) to six (strongly agree).

Tabel 1. Blue print of employee engagement measurement (Bernthal 2007)

Dimensions

Definition

Sub Dimensions

Indicators

Individual

Value

(34 items)

Able to make a

unique

contribution,

experience

empowerment,

and have

opportunities for

personal growth

1. Personal meaning

2. Motivation in their

Work

• Feeling valued and involved

• Pay and benefits

• Training, development, and

career

• Current career intention

• Equal opportunities and fair

treatment

Interpersonal

Support

(14 items)

Work in a safe,

cooperative

environment

1. Trust one another

2. Able to quickly resolve conflicts

when they arise

• Co-operation

• Colleagues

• Family friendliness

Focused work

(14 items)

They have clear

direction,

performance

accountability,

and efficient

work

environment

1. Understand where to focus their

efforts

2. Receive feedback to ensure that

they are on track and being held

accountability for their progress

(they need to know that low

performance is not acceptable and

there are consequences for poor

performance)

3. Work in efficient environment

(efficient in time, resources, and

budget)

• Communication

• Immediate management

• Performance & appraisal

• High involvement

• Organizational commitment

RESEARCH FINDINGS AND ANALYSIS

As main data, we shared 1274 questionnaires. Nevertheless, the valid data and could be

continued were 799 data. The percentage of response from respondents is more than 70

percent. This number is excellent and unconditionally accepted in this research. Analyzing the

data, we are implementing reliability test for all point in questionnaires. Reliability test refers

to the consistency of a measure (Hair 2007). It shows with “Alpha Cronbach Value”. The

value is 0.987. This number is extremely high and shows that questionnaire is reliable.

Checking unclear or bias statements by validity test and using factor analysis to construct

group based on latent variables. Factor analysis is used mostly for data reduction purpose is to

get a small set of variables (preferably uncorrelated) from large set of variables (most of

which are correlated to each other) (Reyna 2010). The below table displays the result number

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