The importance of employee engagement in business performance

by Francesco Pecoraro

There are companies that deliver high profits and grow above their industry average. These high-performance organizations obtain these results not by chance but by choice. Their leaders have decided to create a high-performance culture and incorporate elements that encourage psychological safety, meaningfulness, and availability that will improve business performance and overall business success. Improving the level of employee engagement within the company is one key element to business success.

What is employee engagement?

Employee engagement can be defined as a psychological state of commitment and faith in what a person is doing. Studies report that employees perform better when they are engaged. Employees become engaged when they have the information they need to accomplish their tasks and view their work as something significant for the company. 

In contrast, unengaged employees don’t provide their full attention and effort and do not connect themselves with their work. This produces a lack of connection with their customers and colleagues, leading to poor performance.

Kahn identifies three characteristics of employee engagement:

  1. Psychological meaningfulness
  2. Psychological safety
  3. Psychological availability

Psychological Meaningfulness has the strongest relationship. Job enhancement and work role fit are positively linked to psychological meaningfulness. Meaningfulness comes from employees feeling as though their work is worthwhile and valuable. Rewarding co-workers and supportive supervisor relations are positively associated with psychological safety, whereas adherence to co‐worker norms and self‐consciousness are negatively associated. 

Psychological Safety is experienced when there is established trust, and employees can engage in their work without fear of consequences that might negatively impact their career or self-image. Psychological availability is positively related to resource availability and negatively related to participation in external activities. 

Psychological Availability is established when people have the psychological, emotional, and physical resources to engage personally in their work. These three characteristics of engagement in employees coincide with the role PPM plays in stakeholder engagement

In fact, PPM allows stakeholders to have an overview of what the organization wants to accomplish. To build trust among stakeholders, companies can use PPM to establish a process for managing resources based on the goals of the organizations so that stakeholders can fully engage in their work.

Communication also plays a crucial role in stakeholder engagement. Mishra, Boynton, and Mishra (2014) suggest that the right communication strategies could improve transparency and increase engagement. In particular, internal communication is very important to build employee engagement and enhance performance. 

It has been proved that the ability of leaders to communicate is directly related to improved employee engagement. Likewise, Christian, Garza, and Slaughter (2011) also found that transformational leadership and an effective leader-member exchange can also positively influence employee engagement.

Management processes

employee engagement impacts profitability just a paycheck employee performance more engaged employees employee engagement bottom line employee engagement employee engagement every day high turnover high level flip side customer ratings engaged employees engaged employees customer satisfaction improve business outcomes business outcomes low employee engagement higher employee engagement business performance engagement and performance impacts profitability senior leadership company culture high employee engagement disengaged employees cost engaged workforce disengaged employees highly engaged employees improve employee engagement employee satisfaction employee experience increased productivity workplace culture organizational success engaged teams under performing companies low turnover organizations constructive feedback higher productivity well being completely committed other employees safety incidents well being customer experience well designed jobs reduction in absenteeism high turnover organizations highly engaged less absenteeism extra mile
Researchers report that managers who employ and adhere to management principles create an environment that contributes to success by removing roadblocks and increasing employee engagement. At the same time, leaders who use the management process set expectations and keep employees accountable, in addition, to allocate resources effectively to meet management expectations.

PPM is considered a management process in which managers execute management tasks in order to execute the process. These tasks lead to empowerment, intervention, and encouragement (Jonas, 2010). This illustrates the important role leaders have in driving the engagement and overall culture of the organization

Of course, directly addressing engagement, and culture, through a specific strategy is important. In the same way, it is also important to incorporate organizational leaders, management processes, and strategy-making in order to drive the goals of the organization.

Stakeholder Engagement in Project Portfolio Management (PPM)

Employees are considered stakeholders, however, beyond employees, stakeholders include many more groups and varying interactions within the firm. If companies treat stakeholders evenly, it contributes to firm performance.

Harrison & Wicks (2013) report that stakeholders can be seen as being in competition with each other for a share of the limited resources of the company, resulting in both potential and realized conflict. At the same time, despite this conflict, if stakeholders want to achieve their own goals, they depend on the company’s support (Freeman, Harrison, & Wicks, 2007). 

This relationship between stakeholders and the company underlines the importance of cooperation among all parties to drive value for the whole organization. To positively impact the culture of the organization through managing stakeholders, it is important for companies to integrate shared rules for the organization and stakeholders that go beyond just self-interest.

Keep in mind

PPM practices incorporate stakeholders, it has been proved that if companies want to be successful, they must develop strategies that include increasing employee engagement. Engaged employees drive organizational performance and firm values and are critical to achieving a competitive advantage in the business. As stakeholders play a critical role in PPM, the engagement of stakeholders affects the culture of the company due to their interconnected nature.


Why is employee engagement important for business performance?

Employee engagement is important for business performance because engaged employees are more committed to their work, which leads to increased productivity, better performance, and improved customer service. Engaged employees also contribute to a positive company culture and help to attract and retain top talent.

How can companies improve employee engagement?

Companies can improve employee engagement by providing employees with the information they need to accomplish their tasks, ensuring that employees view their work as something significant for the company, and establishing trust between employees and management. Effective communication, leadership, and management processes are also important for improving employee engagement.

What is the relationship between stakeholder engagement and employee engagement?

Stakeholder engagement and employee engagement are interconnected because employees are considered stakeholders. Engaging stakeholders evenly contribute to firm performance, and engaged employees drive organizational performance and values. Therefore, engaging stakeholders and improving employee engagement are both important for achieving a competitive advantage in the business.

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