The Relationship between Compensation and Selected Dimensions of Employee Engagement in a Mid-Sized Engineering Services Firm

Employers have focused increasing attention on monitoring employee engagement over the past decade. This research study explored the employee engagement dimensions of 1) alignment with the organization, 2) management effectiveness, and 3) salary and compensation based on the perceptions of employees at a medium-sized engineering services firm. Data were collected each year, for three years from employees using a 47-item electronic survey that addressed employee engagement. The results of the study established a quantifiable relationship and evidence of a path between these three dimensions of employee engagement. A non-parametric structural equation modeling (SEM) technique was employed to analyze the impact of compensation on alignment with the organization and opportunity for development and recognition. It was found that these dimensions shared a strong relationship and provided preliminary evidence that compensation shares a causal relationship with alignment with the organization and opportunity for development and recognition. This finding is contrary to many prominent studies by Buckingham and Coffman (1999), Wagner and Harter (2006), and Harter, Schmidt, Asplund, Killham and Agrawal (2010), which underplay the role of compensation in employee engagement. Future studies should test experimentally or quantitatively whether compensation has an impact on employee engagement and focus on determining what factors have the most and/or least influence on key employee engagement behaviors. INTRODUCTION High levels of employee engagement in domestic and global firms promote retention of talent, foster customer loyalty, and improve organizational performance and stakeholder value (Lockwood, 2007). Engaged employees are motivated to extend their efforts beyond their formalized job descriptions to help the organization become successful. This study attempts to develop a better understanding regarding how employees are engaged in addressing the mission of an organization. Employers may reap rich returns from investments in their employee base. Maskell, Baggaley and Grasso (2011) reported that investment in people as one of the key practices associated with lean accounting. The authors also argued that successful lean organizations make employee training, involvement, and empowerment their utmost priorities. Xu and Thomas (2011) maintained that organizations aspire to have engaged employees and spend considerable resources to measure and improve employee engagement. Furthermore, Bras and Rodrigues (2007) stated that expenditures associated with employee development could be translated into quantifiable organizational assets. Van Rooy, Whitman, Hart and Caleo (2011) also argued that measuring employee engagement should not be foregone, even in an economic downturn. This research is important as it suggests that compensation may be a key motivational force to enhance financial performance of companies. EMPLOYEE ENGAGEMENT Researchers have employed a wide variety of constructs to describe employee engagement in an organization. For example, Sanchez-Burks (2005) used the socio-religious construct of Protestant Relational Ideology to describe organizational behavior in American firms. Markos and Sridevi (2010) discussed the complexity and diversity associated with adequately describing employee engagement. They argued in favor of understanding various dimensions associated with employee engagement. Meduna (2009) identified multiple themes associated with employees, which could be instrumental to organizational success. Avolio, Gardner, Walumbwa, Luthans and May (2004) acknowledged the existence of a variety of constructs associated with employees’ attributes. Additionally, Macey and Schneider (2008) argued that “. (the) meaning of employee engagement is ambiguous among both academic researchers and among practitioners. ” (p.3). They also emphasized the need to better understand the effects of employee engagement in terms of business outcomes. It can hence be argued that companies that use employee surveys should verify the dimensions of employee engagement they are measuring. This is important Dr. Preetinder S. Gill has more than 10 years of product engineering/management experience in the Nor th American automotive industry. He holds a PhD in Technology (Engineering Management) from Eastern Michigan University and master’s degree in mechanical engineering from the University of Michigan. His PhD research focused on employee engagement and application of engineering management tools & techniques to healthcare management. Dr. John Dugger is professor of Technology Studies and Coordinator of the Doctoral Program in Technology at Eastern Michigan University. His research interests include employee and student engagement. Dr. Dugger has enjoyed 31 years in higher education, has authored or coauthored more than 40 refereed publications and has been awarded more than $1.8 million in contracts and grants. M r . F r a n k N o r t o n i s t h e Associate Affiliate Director for the Michigan Project Lead The Way Affiliate. He holds a B achelor ’s of Science degree from Eastern Michigan University and is currently completing his Master’s degree in Educational Research and Assessment. His interests include educational robotics, web design and programming, and STEM education research. Mr. Norton can be reached at fnortoni@ emich.edu.