The study

This study examines the link between an organisation's commitment to its employees and organisational performance. The study surveyed CEOs and their second in command working in medium-sized New Zealand companies (50-100 full-time employees). A block sample selection design, which involved selecting companies from New Zealand’s four main business centres, was used. Table 1 reports the study's sample size and response rate.

Table 1: Response Rate

Questionnaires sent	140
Responses received	97
Response rate	69%
Incomplete responses	12
Unmatchable responses	3
Usable questionnaires	82
Usable response rate	59%

Regression analysis was used to assess the impact of organisational commitment to employees on firm performance. Firm performance was measured in three ways: financial (e.g., return on investment), market (e.g., market share), and long-term (e.g., organisational reputation). While organisational commitment to employees had a positive effect on financial and market performance, the effect was statistically insignificant. In contrast, organisational commitment to employees did have a statistically significant effect on long-term performance. Greater levels of organisational commitment to employees were associated with better long-term performance.

A second series of regression equations were used to examine how commitment to employees benefited service and manufacturing enterprises. A statistically significant effect was observed between organisational commitment to employees and performance, especially long-term performance, for service enterprises. The relationship between organisational commitment to employees and performance was not as strong for manufacturers. For manufacturers, while there was a trend between organisational commitment to employees and performance, the relationships were not statistically significant. Perhaps this is due to the typically high automation that characterises manufacturing environments.

Regression analysis was also used to test the influence, if any, that a firm's competitive strategy has on the relationship between organisational commitment to employees and firm performance. The results indicate that a firm’s strategy contributes strongly to understanding the relationship between organisational commitment to employees and firm performance. Companies with both high organisational commitment to employees and a clearly focused strategy experience organisational performance twice as high as those companies where a clear business strategy is absent.

The importance of organisational commitment is very clearly illustrated through Figure 1. Companies perform at a consistently low level, regardless of the presence or absence of a focused competitive strategy, when organisational commitment to employees is low. However, as organisational commitment rises, organisational performance increases by the greatest amount for companies with a focused competitive strategy. This indicates that the presence of clearly focused and targeted strategies is of limited value without the employee commitment to implement them.

 

Implications for Managers

These results provide evidence of the importance of human resources in maximising long-term organisational performance. The presence of organisational commitment to employees can be used to gain employee support for the organisation and, in turn, maximise the benefits firms receive from their staff.

When a committed workforce exists, employees exhibit greater productivity and individual performance increases. However, it is only when this increased productivity is directed in certain ways that organisational performance is improved. A clearly focused strategy is an effective means of communicating company goals and, in particular, behaviour that is most valuable to the organisation. The presence of a clear strategy directs committed employee behaviour in a performance-enhancing direction. Therefore, both a clear company strategy and high organisational commitment have been established to have an impact on organisational performance.

Organisational commitment to employees can be used to control employee actions and, as a result, increase organisational performance. Organisations with a clearly focused positioning strategy may find high commitment to employees to be an effective means of ensuring employee behaviour is in its best interests. This suggests that human resources should be considered more carefully in their role as a control function. Commitment can positively influence employee productivity by building bridges with employees rather than forcing behaviour without making any emotional or psychological link. However, the degree to which organisational commitment to employees is effective will be influenced by employees’ perceptions of the organisation’s commitment and a time-lag effect may occur, suggesting that organisational commitment to employees may take time to have an effect.References

Becker, Brian, Mark Huselid and Dave Ulrich. "The link between people and strategy: Companies often treat workers as a cost, rather than as a source of competitive advantage." Financial Times (2001): 6-12. Journal online. Accessed 28 September 2002. Available from Proquest 5000.

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