Organisational climate is more important than engagement

Engagement is not enough to drive performance. Organisations should consider five themes of organisational climate and staff must share a “common enemy”

Organisational climate trumps employee engagement for achieving the best business performance, according to Moira Clark, professor of strategic marketing at Henley Business School, and director of The Henley Centre for Customer Management.

Speaking at the Universities Human Resources (UHR) conference in Bristol, Clark said that “employee engagement is not enough,” and that an organisational service climate is also needed to drive high performance.

Pointing to her research model, Clark said engagement “does affect employee intentions to leave”, and that if employees are engaged they are “less likely to be stressed” or absent.

“This is nothing new. But what was surprising to find in the research was that the more engaged employees are the worse the business performance is,” she said. “When we looked into it more we found [that] the more engaged the employee is in the job, the more the end customer is seen as inconvenient.”

What does drive high business performance is service climate, Clark continued, emphasising a need for both engagement and for all employees to be customer focused.

“Service climate is the atmosphere or feeling in the air... and [employees] perceptions of policies, practices and rewards,” explained Clark. “It’s not what the CEO says. It’s the reality of what really goes on, not statements of intent.”

There are five key service climate themes that need to be addressed, Clark continued, including structure, reward and recognition, cohesion, warmth and support, and customer care.

Regarding structure, high-performance companies exist where there is open communication, flexible rules and procedures, and high levels of staff participation, Clark said. The opposite is true in low-performance companies, which typically feature closed communication, rigid rules and procedures, and low levels of participation.

Regarding cohesion, Clark said where there are high levels of staff interaction and socialising and where there is a shared perception, performance is high.

“Successful companies focus on this team spirit,” she added. “In the most successful companies employees have a common enemy to be cohesive and pull together to hate together.”

This “common enemy” in many cases is managers, staff and customers hating the common enemy of the head office or senior managers, Clark said. But in high-retaining companies the “common enemy” is often external.

“It could be a common enemy of the government or a competitor,” she said. “In high-retaining companies this common enemy could be a common cause such as a CSR strategy that employees care about. But it has to align to the strategy internally.”

Clark went on to add that in low-retaining companies all employee groups see each other as common enemies.

However, this approach will only create a high-performing business if organisations treat it as a “holistic phenomenon”, Clark warned, highlighting that all five themes need to be addressed.