STRESS MANAGEMENT AND EMPLOYEE ENGAGEMENT: A CASE STUDY

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1 Abstract STRESS MANAGEMENT AND EMPLOYEE ENGAGEMENT: A CASE STUDY Melita Moretti, M.A. Trebinjska ulica 2, 1000 Ljubljana, [email protected] Natalija Postružnik, M.A. Trčova 211a, 2229 Malečnik, [email protected] The 2004 EU framework agreement on work-related stress signed by the European social partners defines stress as a mental state that arises from the inability to fulfil the needs and expectations of others. Stress affects the efficiency, productivity, and creativity of the individual and strongly influences job engagement. Successful stress management improves employee engagement, relieves anxiety, reduces absenteeism and substantially lowers employee turnover. The aim of the article is to show the influence of stress management on employee engagement in general, and to discuss the findings of the November-December 2011 survey carried out in an insurance corporation. Keywords: employee engagement, stress, insurance industry, corporate success, management. Povzetek OBVLADOVANJE STRESA IN ZAVZETOST ZAPOSLENIH: ŠTUDIJA PRIMERA Mag. Melita Moretti Trebinjska ulica 2, 1000 Ljubljana, [email protected] Mag. Natalija Postružnik Trčova 211a, 2229 Malečnik, [email protected] Okvirno sporazum EU o stresu pri delu, katerega so leta 2004 podpisali evropski socialni partnerji, opredeljuje, da je stres duševno stanje, ki ga povzroča nesposobnost izpolniti potrebe in pričakovanja drugih. Stres vpliva na učinkovitost, produktivnost in ustvarjalnost ljudi in močno vpliva na zavzetost za delo. Uspešno obvladovanje stresa izboljšuje zavzetost zaposlenih za delo, lajša bolestni strah, zmanjšuje odsotnost z dela in bistveno zmanjšuje menjavanje služb. Avtorici nameravata pokazati vpliv obvladovanja stresa na zavzetost zaposlenih za delo v splošnem in razpravljati o spoznanjih iz ankete, izvedene novembra in decembra 2011 v neki zavarovalnici. Ključne besede: zavzetost zaposlenih za delo, zavarovalništvo, uspeh podjetja, upravljanje 1 Introduction Rapid technological and social change is accompanied by changes in social relationships. The business environment demands sustained corporate success (Schuler and Jackson, 2006). Changes in customer wishes and expectations, legislation, work organization, as well as ever-increasing competitiveness call for constant alterations in the functioning of corporations as a whole requiring high levels of employees adaptability (Schermerhorn, Hunt and Osborn, 2004). The employees feelings of self-respect, job security, and self-worth are constantly being put under pressure (Looker and Gregson, 1993). Long-term exposure to pressure in the business environment can lead to a range of physical, psychic, and social disorders. This phenomenon is called stress. As stress becomes a regular feature of personal and business life, the need to recognize, manage, and learn to live with stress becomes essential. The European Union included stress management in the European Community Strategy for Health and Safety at Work However, the fact that a certain amount of stress is necessary must not be neglected. Stress is the driving force behind self-improvement and motivation (Looker and Gregson, 1993). As research shows, one of the most important instruments of employee motivation is the delegation of decision-making authority (CLC, 2003; Gallup, 2006). Allowing employees to voice their opinions and make suggestions before decisions are taken by

2 management has a large influence on employee engagement, no matter the employees actual influence on the decision (Yukl, 2010). The aim of our work was to show the influence of stress management on employee engagement and set out directions for the improvement of business performance in the insurance industry. Quantitative research was conducted on a sample of 136 insurance employees. 2 Work-related Stress Work-related stress implies nervous tension, overexertion, pressure, and burden. It is a physical and mental reaction of the body to strain 1 (Battison 1999; Schmidt 2003; Ihan 2004). Work-related stress can be divided into two categories (Looker in Gregson 1993; Božič 2003): Positive stress (the employees abilities are bigger than the demands; the stress reaction has a positive impact on the employee s preparedness, capability, creativity, and productivity); Negative stress (emotional and mental pressure, shocks which cause illness and are a consequence of shortor long-term exposure to stressful circumstances). Stress is not a disease, but if it becomes too much too handle and lasts too long, it can affect mental or physical health. A certain amount of work pressure can increase productivity and create satisfaction at reaching one s goals. When work pressure becomes too high (e.g. economic competition, restructuring, reorganization, constant changes in technology, necessary skills, knowledge, and work conditions, work overload, inadequate information), it causes work-related stress, which negatively impacts all employees. The consequences of work-related stress are as follows (EU-OSHA, 2002): Individual consequences: behavioural (smoking, alcohol and drug consumption, violence, harassment, maltreatment), psychological (insomnia, depression, the inability to concentrate, easy irritation, burnout), and physiological consequences (back and heart problems, weak immune system, migraines, asthma, etc.); Organizational consequences: negative effects on workplace co-operation (absenteeism, employee turnover, tardiness, discipline problems, aggressive communication, isolation), costs (increased compensation or healthcare costs), and corporate success (decreased productivity, workplace accidents, poor decision-making, mistakes); Social consequences: healthcare costs (costs of medical consultations, hospitalizations, and other forms of medical treatment and rehabilitation subsidized by the state), absenteeism costs 2 (loss of production costs because of employee absenteeism), and early retirement costs. Employers are goal-oriented and are often too late in realizing the effect work-related stress has on their employees. Stress management at the workplace leads to greater efficiency and better workplace health and safety. A European survey (EU-OSHA, 2005) into workplace conditions in Slovenia presented that 2005 showed a marked increase in perceived stress compared to In 2001, 26 % of the interviewed Slovene workers were exposed to stress, which was less than in all other EU countries. However, in 2005 the percentage rose to 37.7 %, a much larger share than in other EU countries, which was 22.3 %. 3 Employee Engagement Numerous definitions of engagement can be derived from the practice- and research-driven literatures. An additional definition can be found in common-sense theory, i.e. the common intuitive sense that people, and particularly leaders within organizations, have about work engagement: employee engagement is understood as a desirable condition which has an organizational purpose, and consists of commitment, involvement, enthusiasm, passion, focused effort, and energy. To some, engagement and satisfaction are linked directly if not regarded as completely isomorphic. Harter et al. (2002) explicitly refer to their measure (The Gallup Work Place Audit) as satisfaction-engagement and define engagement as the individual s involvement and satisfaction with as well as enthusiasm for work. Erickson (2005) writes that engagement is above all a simple satisfaction with employment arrangement or a basic loyalty to the employer characteristics that most companies have been measuring for years. Engagement, in contrast, is about passion and commitment the willingness to invest oneself and expend one s discretionary effort to help the employer succeed. The pillars for that are based in conditions under which people work, and the consequences are considered to be of value to organizational effectiveness (see Erickson 2005). Today, there is 1 Strain consists of stimuli (stressors) for which the organism is unprepared. These stimuli cause confusion, annoyance, and anger. Depending on the employee's physical and mental condition, stress can mean many things: it can be seen as an obstacle, challenge, opportunity, or a threat (Božič 2003; George in Jones 2007). 2 Absence from the workplace.

3 widespread agreement among academics and practitioners that engaged employees are emotionally connected to the organization and cognitively vigilant (Seijts and Crim, 2006). The concept of engagement emerged from burnout research as an attempt to cover the entire spectrum running from employee unwell-being (burnout) to employee well-being (Maslach et al, 2001). Unlike those who suffer from burnout, engaged employees have a sense of energetic and effective connection with their work activities and they see themselves as able to deal well with the demands of their job. Schaufeli, Salanova, González-Romá, and Bakker (2002) define engagement as a positive, fulfilling, work-related state of mind that is characterized by: (1) vigor (i.e. high levels of energy and mental resilience while working, the willingness to invest effort in one s work, and persistence also in the face of difficulties); (2) dedication (i.e. a sense of significance, enthusiasm, inspiration, pride, and challenge); and (3) absorption (i.e. being fully concentrated and engrossed in one s work, whereby time passes quickly and one has difficulties with detaching oneself from work). Positive associations between engagement and rewarding co-worker and supervisor relations were found in a study by May, Gilson, and Harter (2004). Demerouti et al. (2002) report moderate positive correlations between organisational commitment and all three engagement dimensions. Wellins and Concelman (2005a) suggest that engagement is an amalgamation of commitment, loyalty, productivity and ownership. Wellins and Concelman (2005a) believe that engagement is the illusive force that motivates employees to higher (or lower) levels of performance. Colbert, Mount, Harter, Witt, and Barrick (2004) define engagement in terms of a high internal motivational state. In accordance with these definitions, Dvir, Eden, Avolio, and Shamir (2002) define active engagement in terms of high levels of activity, initiative, and responsibility. (Macey and Schneider, 2008). Some practitioners define engagement in terms of organizational commitment. For example, Wellins and Concelman (2005b) suggest that to be engaged is to be actively committed, as to a cause. Maslach et al. (2001) have proposed that engagement can be characterized by energy, involvement, and efficacy. It is common to define employee engagement as putting forth discretionary effort, defined as extra time, brainpower, and energy (Towers- Perrin, 2003). Engaged employees work with passion and feel a profound connection to their company (Gallup 2006). An engaged employee is a person who is fully involved in, and enthusiastic about, his or her work. Rutledge (2005) explains that truly engaged employees are attracted to, and inspired by, their work ( I want to do this ), committed ( I am dedicated to the success of what I am doing ), and fascinated ( I love what I am doing ). Engaged employees care about the future of the company and are willing to invest the discretionary effort exceeding duty s call to see that the organization succeeds. Engaged employees work with passion and feel a deep connection to their company. They drive innovation and move the organization forward. Non-engaged employees are essentially checked out. They are sleepwalking through their work day, putting time not energy or passion into their work. Actively disengaged employees aren t just unhappy at work: they re busy acting out their unhappiness. Every day, these workers undermine what their engaged co-workers accomplish (Lockwood, 2007). The Towers Perrin 2005 Global Workforce Survey involving about 85,000 people working full-time for large and midsized firms found that only 14 % of all employees worldwide were highly engaged in their job; Gallup (2006) sets the level at 15 % (in the USA). The links between engagement, discretionary effort and productivity are proven, with Aon Hewitt Best Employers delivering on average 9 % more profit per employee and double the revenue growth of other organizations (Aon Hewitt 2012). In 2004 results in Slovenia were as follows: European Best achieved 72 % on engagement score (the higher the better, 100 % is the highest possible), EU Best 71 %, Slovenian Average 38 % and the corporation, which participated also in the present survey, 53 % (Hewitt, 2004). 4 Empirical Research The research problem dealt with in this article is the influence of stress management on employee engagement in the chosen corporation. The goal of our research was to discover the connection of stress management on employee engagement. 4.1 Methodology The research was conducted as a case study (Easterby-Smith, Thorpe and Lowe, 2005; Yin, 2002) on the influence of stress management on employee engagement in the selected corporation of the insurance industry in Slovenia. The instrument of the research was an e-questionnaire. The questionnaire was divided into three sequences. The first sequence consisted of demographic questions. The second sequence consisted of 7 statements dealing with stress at the workplace (derived from the research on stress at the workplace conducted by IDO

4 Primorska). The final question sequence consisted of 6 employee engagement statements suggested by the corporation (derived from the Gallup 12 Questions, Gallup 1999) - Table 1. Table 1: Statements Work-related stress (WRS) S1: I feel safe at my workplace. S2: I don't suffer from mood swings, decision-taking, poor concentration, and memory problems. S3: I think about work-related problems even when not at work. S4: I have recently increased the consumption of alcohol and other intoxicating substances (smoking, etc.). S5: I hope my problems will solve themselves. S6: The workday is too short for the tasks I have to perform. S7: I often struggle with time management. Employee engagement E1: For a well-done job I receive praise or an award. E2: My work makes me feel successful. E3: My work makes me content. E4: A trustworthy relationship exists between employees. E5: I am free to choose how to perform my work tasks. E6: Being a member of our organization makes me proud. The respondents indicated for the sequences two and three on a scale from 1 to 5 whether they strongly disagree (1) or strongly agree (5) with a particular statement. The research was conducted in November-December The survey questionnaire was tested on a pilot sample of 10 employees from the analysed corporation. The conclusion reached was that the statements and measurement scales used in the survey were objective and the instructions free of any ambiguity. The statistical reliability of the questionnaire was tested by using Cronbach s alpha: for questions S1 to S7 was 0.79, for questions E1 to E6 it was The reliability of the measurement scales and statement consistency were therefore acceptable. The collected data was then analysed using SPSS. Our findings are not applicable to the entire insurance industry in the Republic of Slovenia. We do, however, underline the relevance of the indicators for other insurance corporations. In our research, we aimed to test the following hypothesis: H1: There is a positive relationship between work-related stress and employee engagement. 4.2 Sample Description We included all 874 employees of the analysed corporation into the sample. 136 employees responded to the questionnaire (15.56 % response rate). 44 of the respondents were women (32.4 %) and 92 were men (67.6 %). All other relevant respondent data is shown in tables 1, 2, 3, and 4. Table 2: Age Age f Amount (%) F % Under From 26 to From 31 to From 36 to From 41 to From 51 to From 61 to Total Table 3: Education Education f Amount (%) F % Secondary Post-secondary or university MA, PhD Total Table 4: Position

5 Position f Amount (%) F % Regular employee Small team leader Manager Total Table 5: Time of Employment Time of Employment f Amount (%) F % Less than 1 year years years years years years years Total Testing the Hypothesis The analysis was conducted in two parts. Firstly, we reduced the sequence on employee engagement and, utilizing the PCA method (Principal Component Analysis) and the Weighted Average Method introduced a new variable called engagement. In the regression model, this variable represents the effect. Secondly, we constructed a multiple regression model in which the sequence on stress at the workplace represents the cause. During the first part, we included the statements from the sequence on employee engagement into the model. Next, we tested the sampling adequacy by using the Kaiser-Meyer-Olkin (KMO) measure and Bartlett s test. The KMO measure was (a value of 0.6 is a suggested minimum). Furthermore, Bartlett s test of Sphericity at p<0.05 indicates that the correlation matrix is not an identity matrix. On the basis of these results (these tests provide a minimum standard), the decision was made to proceed with the analysis. The PCA method was used for the joint analysis of independent variables (the rescaled extraction of the variables was between and 0.993). The analysis (Table 6) showed that engagement consisted of two factors (The first two row factors together account for % of the total variance. From the second factor onwards, the line of the scree plot graph was almost flat, meaning that each successive factor accounted for smaller and smaller amounts of the total variance.). Table 6: PCA; Total explained variance (%) Statement FAC1 FAC2 E2: My work makes me feel successful E3: My work makes me content R6: Being a member of our organization makes me proud E4: A trustworthy relationship exists between employees E5: I am free to choose how to perform my work tasks E1: For a well-done job I receive praise or an award Total explained variance (%) Rotation method: Varimax with Kaiser Normalization; headlines of the columns: (FAC1) intrinsic elements, (FAC2) extrinsic elements. This was followed by the weighted average method (COMPUTE i1= (FAC1 * (λ1) + FAC2 * 1.108(λ2)) / (2.649(λ1) (λ2))), which gave us a new variable called engagement. The stepwise regression method 3 used in the second part of the analysis showed that four of WRS-related statements (shown in Table 8) displayed a positive effect on employee engagement (unstandardized β was between and 0.347). Other statements (S3, S4 and S7) do not have any statistical effect on employee engagement, meaning unstandardized β was 0. 3 First, we start with no predictors in our "stepwise model." Then, at each step along the way we either enter or remove a predictor based on the partial F-tests that is, the t-tests for the slope parameters that are obtained. We stop when no more predictors can be justifiably entered or removed from our stepwise model, thereby leading us to a "final model."

6 Table 7: Model Summary Model R R square Adjusted R Square Std. Error of the Estimate a b c d The analysis showed that the stepwise regression model explained 52.7 % of the variance of the dependent variable: employee engagement (Table 7). Table 8: Coefficients Model Unstandardized Coefficients Standardized t Sig Coefficients B Std. Error Beta (Constant) , S1: I feel safe at my workplace S5: I hope my problems will solve themselves. S2: I don't suffer from mood swings, decision-taking, poor concentration, and memory problems. S6: The workday is too short for the tasks I have to perform This led to the conclusion that the hypothesis can be accepted and that there exists a positive relationship between work-related stress and employee engagement. 5 Conclusion Stress is not only a concern of the employees, it is also a concern of the organization which employs them. An organization which decides to tackle the problem of work-related stress has to bear in mind that the costs to do so will in the long term still be lower than the costs of employing new workers, paying overtime, etc. Every organization should create a stress management strategy. Decreasing work-related stress is the responsibility of management, but if employees want to achieve the best results, they will have to work together with management. Research shows that engaged employees perform better in the terms of financial productivity and at the same time contribute to the brand value and brand strength. Employee engagement is not to be misunderstood with the concept of satisfaction or employee commitment. Truly engaged employees are attracted and inspired by their work, committed and fascinated by what they do, and want to perform better than expected for the company, shareholders, customers and other stakeholders. Based on our research we can conclude: 1. The hypothesis has been accepted and there is a positive relationship between the level of stress and the level of employee engagement in the analysed insurance company (the lower the stress, the higher the employee engagement); 2. The most important statement regarding the effect stress has on the level of employee engagement is S1, which leads us to the conclusion that leaders should concentrate on establishing work conditions that reduce the possibility of negative stress and diminish anxiety. It must also be stated that the influence of the recession on the respondents cannot be ruled out. This, however, was not an object of the research; 3. There is a high level of passivity among employees (S5). This tells us that education on stress management and its impact of employee engagement should be performed across the organisation; 4. Three of the statements do not relate to stress management (S3, S4, and S7), meaning that the stress is manageable and does not cause deviant behaviour (alcoholism, drug abuse and similar) or the transfer of work-related problems into the domestic or after-hours environment. This is a positive result, as these

7 statements do not reflect on employee engagement (its influence the high level of these three statements would be a negative one is not present); 5. A high(er) workload was noted, although it is not perceived as posing an overwhelming problem; 6. In the analysis we established two factors which define employee engagement, the so-called intrinsic elements and extrinsic elements. One of the statement (S6) has a strong impact on the engagement index, being itself one of the factors (=extrinsic elements); 7. Therefore it would be of advantage to establish a system of non-financial rewards and commendations within the company, as the extrinsic elements factor was found to have the biggest impact on the engagement index, and thus a higher effect on financial productivity, and could also diminish the stress level. Limitations of the paper: 1. The study was conducted in one financial institution: the results are therefore applicable to other areas of business only with certain restraints and caution; 2. The study was not based on a longitudinal database; 3. Other possible influences (apart from the engagement-work-stress relationship) were not taken under consideration. On the basis of our results we recommend the following: Every organization should create a stress management strategy in order to reduce operating costs and raise employee engagement and productivity. One of the key elements of stress management that should be adopted is the creation of an employee wellbeing programme: ensuring regular physical activity, a flexible worktime, and regular medical checks); Regular courses on stress management at the workplace; Regular courses for middle management about their role in stress management and employee engagement, as well as their influence on productivity and brand strength; Sharing good experience among European organizations; Work tasks should be designed in such a way as to give the employee a sense of importance ; Roles and responsibilities should be clearly defined. By managing negative stress and encouraging and raising employee engagement, the organization will create a win-win situation that will make it easier to fulfil the financial expectations of the owners and other shareholders. Bibliography Hewitt, A. (2012). Retrieved from (on June 15th 2012). Battison, T. (1999) Premagujem stres. Ljubljana: DZS. Božič M. (2003). Stres pri delu : Priročnik za prepoznavanje in odpravljanje stresa pri delu poslovnih sekretarjev. Ljubljana : GV Izobraževanje. CLC Corporate Leadership Council. (2003). Linking employee satisfaction with productivity performance, and customer satisfaction. Colbert, A. E., Mount, M. K., Harter, J. K., Witt, L., & Barrick, M. R. (2004). Interactive effects of personality and perceptions of the work situation on workplace deviance. Journal of Applied Psychology, Vol. 89, No Demerouti, E., Bakker, A.B., Nachreiner, F., & Ebbinghaus, M. (2002). From mental strain to burnout. European Journal of Work and Organizational Psychology, Vol. 11, No Dvir, T., Eden, D., Avolio, B. J., & Shamir, B. (2002). Impact of transformational leadership on follower development and performance: A field experiment. Academy of Management Journal, Vol. 45, No Easterby-Smith, M., R. Thorpe in A. Lowe. (2005). Raziskovanje v managementu. Koper : Fakulteta za management. Erickson, T. J. (2005). Testimony submitted before the U.S. Senate Committee on Health, Education, Labor and Pensions, May 26. EU-OSHA. (2005). Stres. (on June 10th 2012) EU-OSHA. (2002). Work related stress. Facts (on June 18th 2012)

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