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The Message to Your Employees: Alienation or Empowerment?

A growing proportion of any company's value rests on its ability to harness employees' creativity, initiative, and commitment — all products of employees' organizational identity. Harvey Hornstein explains that how people are treated, rather than the benefits they receive, best predicts their willingness to support organizational goals.
This chapter is from the book

"Working here is truly an unbelievable experience. They treat you with respect, pay you well, and empower you. They use your ideas to solve problems. They encourage you to be yourself. I love going to work."

--Employee of Southwest Airlines, the company ranked number one in Fortune magazine's 1998 list of the "100 Best Companies to Work for in America"

You'd think that organizations would work harder to earn their workers' devotion and allegiance; after all, no psychological force helps in the achievement of organizational goals more than employees' identification with the companies for which they work. Employee initiative, risk-taking, and expressions of creativity—as well as increases in pro-organizational effort and decreases in counter-productive, self-serving work behavior—can all be linked to the presence of employees' organizational identification and can result in a more powerful company. Cross-cultural evidence from nations as widely separated as the UK and Japan shows that employee turnover is markedly diminished when identification with the company is strong, resulting in a major financial benefit to organizations.1 A survey conducted by the American Management Association reveals that more than 50 percent of the organizations responding identified loss of talent as a primary cause of the decline in their companies' ability to compete in the marketplace.2 Workers' commitment to remain on the job translates directly into cash for the employer. In a study of 400 small- and medium-sized companies of whom 85 percent said "retaining key personnel" was a top concern, it was reported that the cost for replacing each senior manager was an estimated $50,000. Replacing an experienced worker cost these companies approximately $6,000, and the cost of hiring each new entry-level employee amounted to about $1,500. Whether your company's costs are more or less than these doesn't matter. Simply put, the point is that greater employee commitment means lower rates of turnover, and lower turnover means more profit.3 Financial consequences of personnel retention were also revealed in a recent study conducted by Ernst & Young. Analyzing the responses of 275 portfolio managers revealed that nonfinancial matters guided 35 percent of their investment decisions, and that one of the leading influences on these decisions was a company's ability to recruit and retain employees. Additional, anecdotal evidence that demonstrates the effect of good work-place practices on stock prices comes from the reports of financial analysts who acknowledge including the presence of "engaged employees" in their evaluation of companies.4 Even more direct evidence of the costs borne by companies populated with disengaged employees comes from a Gallup Organization poll. Finding that nearly one in five workers qualifies as disengaged, leads to the conclusion that "actively disengaged workers, based on their numbers, salaries, and productivity cost anywhere from $292 billion to $355 billion a year."5 These data leave little doubt about how much company worth is dependent on loyalty and contributory efforts that are contingent upon the employees' organizational identification.

The degree to which companies' worth is dependent upon employees' organizational identification has also become increasingly clear during the last two decades as key determinants of corporate success have migrated away from the realm of tangible assets and technology toward a harder-to-track ability to leverage employees' knowledge and information.

Baruch Lev and Paul Zarown's 20-year study of 6,800 companies shows that the relationship among financial statements, stock dividends, and stock prices is weakening. This means that during this period, variables in the companies' financial statements were increasingly less useful predictors of either future stock dividends or prices.6 A principle reason for this decline is that traditional accounting information does not accurately index either the value of intellectual capital or organizations' abilities to make use of that capital in innovative ways. These findings are proof that while it would be foolish to argue that any accurate measure of a company's worth can completely neglect tangible assets and technology, it would be equally foolish to overlook the fact that a growing proportion of any company's value rests on its ability to harness employees' creativity, initiative, and commitment—all products of employees' organizational identity.

Further support for this conclusion comes from two professors of business, Theresa Welbourne of Cornell University and Alice Owens of Vanderbilt, who studied conditions associated with the survival of 136 companies in different businesses located throughout the United States. Only 81, or 61 percent, were still operating in 1993, five years after first opening their doors. Personnel policy made the big difference: 91 percent of those with both pay incentives (e.g., stock options or profit sharing) and some marker of general regard for workers, such as training programs, were around to celebrate their fifth anniversary. Only 34 percent of companies lacking these attributes survived that long. Seasoned investment strategists agree with the study's implications. Mary Farrell, a PaineWebber vice president and Rukeyser Wall Street television personality, has been quoted as saying, "In my checklist, there's a section on personnel issues," and many corporate observers and analysts are paying increased attention to those issues as well.7 The power of employees' organizational identification as a social adhesive with bottom-line consequences is also evident in Fortune magazine's annual report of the 100 best companies to work for in America. Comparing the average annual return to stockholders generated by firms that were nominated for the list by their employees with that of firms that were not, shows that investors were better off holding stock in companies that received employees' endorsements. Over a five-year period, these employee-approved companies returned 27.5 percent to investors, compared to only 17.3 percent among those not internally elected to the "Best 100." And over a 10-year period, those nominated returned 23.4 percent to investors, compared to only 14.8 percent among the unendorsed. This means that if an individual were persuaded to invest $1,000 in a firm boasting the emotional attachment of its employees, in eight years that money would have grown to $8,188. But if the same $1,000 were invested in a firm in which employees lacked such ties of allegiance, it would have grown to only $3,976 in the same amount of time.8 Organizational identification greatly influences companies' financial outcomes. In the words of a Gallup poll of 55,000 working men and women, corporate success is directly related to the presence of a workforce that can attest, "At work our opinions count; colleagues are committed to quality; we are given daily opportunity to do our best; and there is a perceivable connection between our work and the company's mission."9

Above and Beyond Job Descriptions

Organizational identification alters employees' personal job definitions. Those with stronger ties of identification define their jobs more broadly than those with weaker ones. As a result, they become more responsible, conscientious organizational citizens.

Successful organizational functioning depends on employees behaving like active citizens of the work community in ways that go beyond the narrow rigidities of formal job descriptions. In other words, companies need their employees to go "above and beyond." It's not surprising that one tactic employees use to hamstring their organizations during labor disputes is to narrowly conform to codified job requirements and insist on not making any effort beyond them.

Organizational citizenship behaviors (OCBs) imply extras.10 Ambitious work habits are essential for organizational effectiveness, although they are almost never specified in job descriptions, nor normally included by name in performance evaluations. They are omitted because these "extra" work activities are difficult or impossible to monitor or quantify. Helping coworkers when one is not required to do so, being courteous (as opposed to simply not being discourteous), and going the extra yard when dealing with customers or vendors—not to mention turning off the lights when they are simply wasting money and energy—are just a few concrete examples of OCBs.

In my conversations with workers, I have discovered that some employees define their jobs as including OCBs while others see OCBs as merely add-ons, lying well outside their official job obligations and, therefore, unnecessary. Work, to the latter group, means doing only what is prescribed, monitored, and rewarded, no more, and less if you can get away with it. But to the former group, the jobs mean much more than that, and these workers, in turn, mean more to their companies.

The reason that some employees behave in ways that go "above and beyond" the bare minimum emerges from data collected by an organizational psychologist, Professor Elizabeth Morrison. Professor Morrison demonstrated that employees' emotional attachments to their organizations were associated with an expansion of their job descriptions.11 What others saw as undesirable and irrelevant tasks, emotionally attached employees saw as duties that were essential and central to their job. Pro-organizational OCBs were a regular part of these workers' activities because they were perceived as right and necessary, even in the absence of organizational surveillance or sanction. The bonds of organizational identification between employees and their companies gave rise to job redefinitions that supported organizational goals, as well as to work, behavior that was a clear expression of the organizational golden rule:

Harming you becomes difficult for me because the two of us are part of we.

When employees lack these bonds, on the other hand, damage to the company is likely to result. When workers feel that their interests and their organizations' are in clashing opposition, common sense and empirical evidence predict that self-serving work behavior is likely to result should employees find themselves in a position to do what's best for themselves without retribution. Without a counter-balancing sense of organizational identification, the most compelling choice among behaviors at work is the one that gains employees the most personal benefit at the least personal cost. If that choice also happens to help their organizations, then they might grudgingly assent. And if their selfish choice would harm their organizations, employees without emotional attachment are just as likely to go ahead with the action to the detriment of their employer.

Rates of in-company theft and sabotage—a high cost to companies around the world—are a vivid illustration of how employees behave in the absence of any sense of identification with their organizations. It comforts some to believe that these crimes are simply economically motivated efforts to make up for deficient wages, but the facts suggest otherwise. Workers at all income levels steal. What's commonly stolen tends to be petty and of little or no value to the thief. Sabotage, a common organizational crime, has no personal economic value for the employee-saboteur. And, most importantly, the evidence shows that employees tend not to steal from employers who treat them respectfully.12 In short, workers more easily succumb to the temptation to rob or harm them rather than us.

Nonstop surveillance, backed by impressive reward and serious punishment, might be capable of deterring employees from making self-serving choices that go against organizational interests. But infallible surveillance is rarely possible and, even it were, worker compliance is a far cry from worker commitment. Behaving well before hidden cameras or curtailing one's anger for the sake of a bonus does not require any heartfelt blending of individual and organizational goals. Without such an internalization of the bond between worker and workplace, the golden rule of organizations—Harming you becomes difficult for me because the two of us are part of we—is not operative. The goals belong to them, not us, and employees' inclinations toward public compliance but private disobedience remain a potential hazard.

Happily, the fact is that organizations possess the power required to build crucial ties of organizational identification. Sadly, it is also true that—despite all the cheery business-section headlines to the contrary—bosses have mainly pursued a path leading to employees' alienation rather than affiliation. As costly as such misconduct is now, it will only become more so. Over the next several years, changes in business and society will serve to drastically increase the price that companies pay for hindering the organizational identification of their workforce.

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