CLV PRINCIPLES FOUND IN

Employee Engagement Value

The concept of Employee Engagement (EE) has been defined across a wide swath of literatures to no conclusive meaning. The most compelling definition from a marketing standpoint hinges on EE’s function in a managerial setting. According to this definition, EE is a multi-dimensional construct aimed at capturing the full range of an employee’s attitude toward his/her organization. The five dimensions of EE are employee satisfaction, employee identification, employee commitment, employee loyalty, and employee performance. Each of these dimensions drives the one subsequent to it, i.e. satisfaction drives identification, identification drives commitment, etc.

Employee Satisfaction is a positive emotional state that results from an employee’s relationship to his/her job and is influenced by a host of factors: work environment, colleagues, supervisor, pay, etc. Employees who are more satisfied can positively impact the firm’s profitability, but this impact is not necessarily a substantial one. More importantly, Employee Satisfaction does have significant impact on Employee Identification.

Employee Identification refers to an employee’s self-concept in relation to his/her membership in the larger organizational group. In other words, an employee who identifies his/herself with the company will place personal stake in the success and failure of the brand. Employee Identification is, naturally, a precursor to Employee Commitment.

Employee Commitment refers to an employee’s psychological attachment to the brand, and is broken down into affective commitment (emotional attachment to the organization), continuance commitment (the need to stay with the organization given the costs of departure), and normative commitment (feeling obligated to continue employment with the organization). A strong commitment to the organization leads to Employee Loyalty.

Employee Loyalty encompasses each of the preceding dimensions, while also involving elements of sacrifice and reciprocity. A loyal employee will go out of his/her way to work above and beyond his/her assigned duties. This translates to improved Employee Performance.

Employee Performance, the final dimension, is self-explanatory. The effectiveness with which an employee performs his/her role within the organization has tremendous impact on the firm’s bottom line.

A recent study developed a comprehensive scorecard consisting of 20 items that integrated the above five dimensions (Kumar and Pansari 2015, 2016). The resulting score from such a scorecard can be classified into the following four groups:

  • Scores of 20 to 39 indicated that the company’s engagement level was low and suggested that the company needed to focus on enhancing the various components of employee engagement at an individual level (such as ensuring their employees were more satisfied, identified with the organization and showed higher levels of commitment to the company).
  • A score of 40 to 59 indicated that employees were somewhat more engaged with the company but implied that some employee engagement factors required immediate attention.
  • A score of 60 to 79 pointed to a still higher level of employee engagement, suggesting that while the overall level might allow the company to function smoothly and perform fairly well, there was room for improvement.
  • Scores of 80 to 100 were evidence that the company had adhered to employee engagement best practices and that employee engagement was high.

Further, EE is also linked to firm profitability. Kumar and Pansari (2016) found that after controlling for other relevant factors including GDP level, marketing costs, the nature of the business and the type of goods, the highest level of growth in profits (10% to 15%) occurred in the group of companies whose employees were highly engaged; the lowest level of growth in profits (0% to 1%) occurred in the group of companies whose employees were disengaged.

How to foster EE? Employee training, orientation, and branding are all observed to positively impact Employee Satisfaction and, by extension, EE. A scale to measure Employee Engagement Value (EEV) has been developed based on managerial interviews and a comprehensive literature review. Like CLV and Salesperson Future Value (SFV), EEV can be used to segment employees based on their respective levels of engagement, as well as the relevant sub-dimensions. Using EEV, firms can pinpoint which areas of employee development need greater nurturing.

References
Kumar, V., and Anita Pansari (2014), "The Construct, Measurement, and Impact of Employee Engagement: A Marketing Perspective," Customer Needs and Solutions, 1 (1), 52-67.
Kumar, V., and Anita Pansari (2015), “Measuring the Benefits of Employee Engagement,” MIT Sloan Management Review, Vol. 56 (4), pp. 67-72.
Kumar, V., and Anita Pansari (2016), "Competitive Advantage through Engagement," Journal of Marketing Research, 53 (4), 497-514.