The Effect of Organizational Change on Employee Engagement

In the recent decades, economies of various parts of the world have been undergoing a lot of fluctuations. The fluctuations in the market are as a result of multiple internal and external forces. Additionally, variations have been coupled with increased competition, globalization, changes in demand and supply of products and services, as well as other market forces, have led to the development of an enterprise environment, which necessitates firms to continuous adapt to remain sustainable. Hence, as a result of the increase in market dynamics, their rate at which organizations have to change is also increasing (Othman, Hamzah, Abas, & Zakuan, 2017). Organization change ranges from mild to significant changes. The factors that also influence the change also vary as it might be as a result of aiming to improve product innovation, optimize the business or even increase the competitive edge of the firm (Maria, Edit, & Istvan, 2015).

However, regardless of the aim, change is an organization can result in several consequences such as changes in the work process, company structure, direct and indirect costs, social process among others (Rubin, 2013). Union Gas Limited is a Canadian based firm that deals with the production of natural gas. The firm is located in Ontario and serves an estimated over 1.5 million clients who live within its surrounding (Economides, and Wood, 2009). Union Gas Limited is involved in the transmitting and distribution of gas for both industrial as well as commercial purposes. Union Gas Limited has also offered a link between the United States and Canada in the delivery of gas. Currently, the firms value is estimated to be 8.2 billion dollars and has an estimated over two thousand employees.

Since its establishment in 19th December 1911, Union Gas Limited has undergone numerous organizational changes. The changes entail; Union Gas limited was formed as a result of merging of three local gas companies (volcanic Oil, Ridgetown Fuel Supply and United Fuel Supply). Initially, the firm headquarters were based at Niagara Falls but were later moved to Chatham in 1918 to increase proximity to the site of gas production. From periods 1920 and 1960, the company expanded its operational territories to other areas such as London, Waterloo, Windsor, Southwestern Ontario among others. There were also strategic expansions that facilitated change in the firm such as the development of compression as well as storage facilities in 1942 in Dawn Township. During the same period, the company also established a pipeline connection to the United States to import gas.

Between periods 1985 and 2007, the firm also underwent numerous changes to meet the expectations of its exceeding customers such as in 1992; the firm sold Union Gas to Westcoast Energy Incorporation, a move that led to the new merger becoming the largest shareholder in the organization. In 1994, the firm also employed a shared service operation with Central Gas Ontario as well as a sister firm to increase its operational base as well as maintain a competitive edge. With the various changes that the firm has undergone, Union Gas Limited has been able to achieve numerous successes. Examples of successes that Union Gas Limited has made over the years include; provision of cheap and affordable gas to the residents of Hamilton City. Secondly, the firm also powers the street railway CNG buses of the town which enables the provision of cheap transportation services to the residents. Thirdly, the firm is also the top 100 companies that offer employment to the surrounding community. Others include; the firm has been able to attract investors, engage in corporate social responsibility thus achieve its goals and objectives (Economides & Wood, 2009).

As a result of the influence of market dynamics in businesses, organisational change has become a topic that several scholars are studying. One of the areas of interests within the research has been the most effective leadership style to implement during an organisational change (Othman, Hamzah, Abas, & Zakuan, 2017). Over the years, there have been numerous studies regarding leadership, leadership styles, as well as leadership theories. The reason is that leaders are required in almost every aspect of the society (political, social and economics). Various leadership theories and forms have been developed and each presents its pros and cons (Rowold, 2014). Most of the literature in recent history has advocated for transformational and transactional leadership as the most effective styles to mitigate through organization change. However, the majority of the studies seem to be favoring transformational leadership style as the choice for implementing organizational change.

Maria, Edit and Istvan (2015) argue that organization change affects the working environment and as a result, it might lead to stress, low morale as well as creating uncertainty among the workers. The repercussions are the adverse effect on the level of employee engagement and performance and productivity levels. Therefore, employee engagement is one of the key success drivers for any organizations regardless of its state.

Employees are the most crucial asset in any organization as they influence its success or failure (Othman, Hamzah, Abas, & Zakuan, 2017). Employees being essential assets is a factor that Union Gas Limited understands as they have employed various strategies and enacted policies to ensure their wellbeing. Moreover, Union Gas Limited has also guaranteed that its human resources are taken care in the vent of any changes in the firm. The firm has undergone numerous changes such as change of ownership, however, despite the differences, it has emerged as a success due to the marching of leadership changes with good leadership style. The firm uses an employee orientation leadership style wherein the vent of any difference, the employees are always prepared. The company treats its employees as equals thus showing them that they are part of the firm which motivates them. Therefore, even with stiff competition in the market, the firm is always ensured of a high level of productivity among its employees.

Furthermore, globalisation, changes in the needs of customers, unpredictable economic trends, talent management as well as employee retainment has resulted in numerous challenges in the working environment. The reason is that changes in a firm can be stressful, create uncertainty as well as lead to low morale which results in employees’ productivity levels declining due to the development of feelings of lack of being valued (Othman, Hamzah, Abas, & Zakuan, 2017). Therefore, to prevent such scenarios, firms should develop a sense of meaning and the purpose for employees in their organization. Additionally, there also exists diverse workforces in firms such as generation X, Y and Millennials who have different values, belief-systems as well as expectations regarding success which makes the employee engagement also become more complex. Hence, it is imperative that leaders play a huge role in motivating as well as encourage the diverse workforce to provide their best to the firm (Othman, Hamzah, Abas, & Zakuan, 2017). Leadership is thus a crucial component in employee management hence a factor contributing to employee engagement in a working environment.

Transformation leadership entails challenging subordinates to put the interests of the firm first thus help it achieve organisational goals (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012). Transformative leaders instill social connectedness between the various level of management thereby improving their levels of productivity. Studies show that the relationship between transformative leadership and employee engagement is positive (Othman, Hamzah, Abas, & Zakuan, 2017). Employee engagement is a crucial concept for firms as through its productivity, motivation, the commitment of employees can be predicted. Employee engagement is the degree the workers commit to an organization and how hard they will work to ensure commitment as well as how long they intend to stay at a firm (Stumpf, Tymon Jr, Favorito, & Smith, 2013). Therefore, as a result of firms being prone to changes be it technical, economical or even executive/ownership require a good leadership style to guide it through the changes effectively.

Research Objectives

The research objectives are divided into primary and secondary goals.

Primary Objective

The aim of the research is to provide an analysis of the leadership styles influence on employee engagement in an environment that has undergone organizational change.

Secondary Objectives

The research also aims at achieving secondary goals and they entail;

Evaluation of the leadership style that is most effective in facilitating employee engagement in an organization.

Measure the differences in employee engagement based on the style of leadership, gender, age, the tenure of employment, race as well as the position held within a firm.

Identification of future strategies that can help improve leadership styles to enhance employee engagement.

The study’s main aim is to evaluate the most effective leadership style that promotes employee engagement in an environment that is undergoing organization change. The outcomes will also show the importance as well as the relevance of incorporating specific leadership styles to increase the level of employee productivity (through improving their level of engagement) when implementing organizational changes.

Scope of Study

The scope of the research is limited to the firms that are undergoing organizational change. The findings of the research might also apply to all organizations as the study was performed in a firm based in Canada. Moreover, other factors have an impact on the employee engagement, and leadership style is one of them. Hence, the scope of the investigation only impacts the influence of leadership style on employee engagement.

Literature Review

In this section, the literature review is presented to investigate the theoretical concepts being studied (i.e., leadership style and employee engagement). The section entails a discussion of various ideas that impact on the relationship such as organizational change, leadership styles and theories as well as employee engagement.

Employee Engagement

Although employee engagement impacts on organizational change, there lacks a universally accepted definition of the term. Kahn (1990) defines the term as, harnessing organizations members to work on their roles as people express themselves cognitively, physically as well as psychologically when performing various tasks (Soane, E., Edwards, C. Y. L., Wisdom, K., Croll, A., & Burnett, 2006). According to the definition, employees hold multiple beliefs about a firm, the role they play in the company, the working condition, their firm leaders and many other elements. The emotional aspect refers to workers’ feelings regarding the factors as mentioned earlier (i.e., employees can either hold a positive or negative attitude). The physical aspect refers to the extent which an employee goes to fulfil their tasks. Other employee engagement definitions focus on commitment to the firm at both the intellectual and emotional levels. Truss, et al. (2006) puts in the argument that passion for work is a characterization of employee engagement. Employee engagement is also defined as the emotional commitment to the attainment of a firm’s goals and objectives. In spite of the lack of a uniform definition, scholars admit that employee engagement entails both the attitude as well as the degree a worker is engaged in and is committed to the role in a firm.

However, Macey and Schneider (2008) also assert that there are more disengaged workers in the workforce in comparison to engaged ones. Hence, it is a concern as most of the firms today rely on maintaining a competitive edge which is attributed to the various levels of engagement (Macey & Schneider, 2008). The author argues that employee engagement levels affect the behavior of the employee which in turn affects the performance of the firm. Therefore, an employee that has negative attitudes may be absent, be less productive, disloyal and not show vigor when it comes to performing of tasks which affects their levels of productivity.

Factors Affecting the Level of Employee Engagement

According to various literature conducted regarding the subject, there is evidence that shows a link between engagement level and employees’ involvement in making decisions regarding their work. One study highlighted that there is lower employee engagement when employees fail to be involved in making decisions regarding their work (Macey & Schneider, 2008). Therefore, most of the studies concluded that it was imperative for employees to be included when making a decision that affect their work. Different scholars also seem to agree that the involvement extent also entails disclosing all information as well as encouraging consultations in the workplace as be benefits of inclusion are more significant than that exclusion. The discussions also provide a positive impact as it creates the perception of inclusion and thus being valued among employees.

The lack of communication that persists during the implementation of a change is the reason why it is rejected in organizations (Stumpf, Tymon Jr, Favorito, & Smith, 2013). The argument presented results in the development of uncertainty among employees which directly impacts on their levels of morale. Other consequences as a result of lack of communication include; perceived threat to job security which creates uncertainty of the future of the employee in the firm thus impacting in the value that employees feel that the firm places on them. The development of negative attitudes creates a situation of Us vs. Them thus creating a hostile environment between management and employees (Stumpf, Tymon Jr, Favorito, & Smith, 2013).

Getting Employees to Accept Change

Change management refers to the capacity of a company to not only identify but also incorporate strategies meant to help it achieve its goals and objectives. Therefore, it entails continual renewal of the direction, capabilities, structures of the business to accommodate the ever-changing internal and external environment. In a study conducted by Stumpf, Tymon Jr, Favorito, and Smith (2013) aimed at how firms can navigate through change management, the findings were that there was a positive correlation between change initiatives and rewards. The study highlights that both extrinsic and intrinsic rewards motivate employees (Zhou, 2000). Extrinsic rewards range from employee benefits, increased pay, promotion, bonuses, job location, and working conditions among others. The firm also provides these extrinsic motivations (Zhou, 2000). The intrinsic motivations, on the other hand, emerge from a worker, who has positive experience from an organization thus entail having a sense of purpose and value among others. Organizational change results in cutting costs which might entail a reduction of extrinsic rewards. Therefore, the decrease in extrinsic rewards might result in employees resisting change. Hence, as a leader one of the methods that can be employed to provide solution to the issue of change resistance in an organization is designing a strategy aimed at increasing the workers value. The result is the development of the sense of self-value and increase in personal motivation which impacts positively on the engagement levels of the employees (Stumpf, Tymon Jr, Favorito, & Smith, 2013).

The study also suggests that perceptions of justice within the firm also influences employee behavior (Othman, Hamzah, Abas, & Zakuan, 2017). Therefore, when the employees feel they are treated right by the firm, they will be more susceptible to change. The type of justice entail; procedural, interpersonal, distributive as well as informational justice. Lastly, research also indicates that organizational identity has an impact on employee loyalty. The reason is that it causes in employees developing a sense of commitment to the firm; thus, they become more trusting to decisions that are undertaken by their leaders.

Definition of Organizational Change

Change is inevitable in today’s business environment. Changes in the market have been brought by a shrinking global market and increasing consumer needs and preferences. The consequence of this is that organizations are constantly adopting new strategies to increase their competitive edge as well as stay relevant. An organization is described as the coordination of both people as well as activities to achieve shared goals. Change, on the other hand, is defined as an effect that occurs as a result of an imbalance of the status quo. Therefore, organizational change can be described as a situation that necessitates a course of action to be undertaken as a result of an imbalance of the status quo to ensure that the shared goals or objectives of an organization are achieved (Van Tonder, 2004).

Although different scholars have provided various definitions of organizational change, there lacks clarity on what constitutes a significant difference. Traditional research studies define organizational change as a substantial alteration in patterns of behavior among a large number of people who make up an organization (Van Tonder, 2004). According to this definition, organization change entails modification of behavior patterns and the usually affects a large number of people. Therefore, the absence of any of the elements invalidates the term organizations change. Recent literature definitions regard organizations as being multi-layered as well as multi-faceted (Maria, Barizsne & Kun, 2015). The reason for the recognition is that internal and external factors affect the organization. Therefore, organizations recognize that the nature of firms is ever changing. In a study titled, “The role of Communication in Organizations Change” it was asserted that the constant thing within firms is the continual change that occurs within them (Van Tonder 2004). Van Tonder (2004), also observed that there were numerous texts regarding the subject. Therefore, an organizational change could be understood as a shift in an entity’s corporate strategy. Hence, regulatory change entailed any alteration in any organizational level thus is not only limited to behavior, processes, structures, strategy and even technology.

Different Types of Organizational Change

According to Maria, Barizsne and Kun (2015), firms can comply with one of the following ways; First reactive change is where a firm adapts to the new situation after the situation is already in effect. Second, pre-active change whereby firm anticipates the changes so that when the case presents itself, they are always ready. Lastly, pro-active change whereby the firm actively works to influence the setting of operation so that it conforms to their planned objectives. However, despite the last adaptation being the most favorable for firms, it is estimated that over 90 percent the adaptations that occur are either as a result of planned changes or purposive changes. Nevertheless, there are also other changes that impact on the organization such as the Unconscious change which emerges from changes as a result of learnings that happen in a firm either due to organizational knowledge or other operation-based learnings. The difference is also natural and ordinary.

Reasons for Organizational Change

According to various studies, external than internal factors have led to the increase in the rate of organizations change. Some of the factors influencing organizational change entail; increased competition, changes in needs as well as preferences of customers, shrinking global economy, a decrease in profits among others (Van Tonder, 2004). Within the corporate sector, the main reason for organization change is as a result of mergers and acquisitions. Studies also show that despite the frequency of undertaking change within companies, there is little change that is made to achieve the desired objectives. Hence, some factors contribute to the failed attempts to achieve organizational change (Seo, Taylor, Hill, Zhang, Tesluk, & Lorinkova, 2012). According to various studies, there lies a link between the two variables (i.e., organizational change and individual change). Therefore, for effective organizational change to occur there needs to be successful change within the people that constitute the organization (i.e., employees) (SEO, et al. 2012).

In a study aimed at investing human response to change found out that there was the need for all the affected stakeholders to not only understand but also accept the incoming changes for the occurrence of an effective change within the organization. Hence, this entails making the involved stakeholders believe in the outcomes of the changes, applying a diplomatic tactic to mitigate any resistance to the changes. Sharif and Scandura (2014) argue that it is imperative that emphasis is placed to mitigating the employee concerns when any change is going to be implemented by a firm. In conclusion, employees are a crucial factor in determining the outcome of any organizational change.

Leadership Role in Organisational Change

Research suggests that leadership plays a significant role in organizations change (Rubin, 2013). The reason is that organizational leaders are the ones tasked with making the decision to not only initiate but also implement a change within a firm. Although there have been numerous studies regarding the subject, there still lacks a single definition of the term leadership. However, several common elements provide definition, and one of them is the influenced element (Rubin, 2013). In this context leadership can best be described as the art and science of leading change effectively (Rubin, 2013).

Different Leadership Styles Used in The Business Context and Their Suitability in Organization Change

Leadership for the longest time has been a popular area for conducting research. Studies have identified numerous styles of leadership (Seo et al., 2012). Every leadership style is different from the other and also applied in a particular context. In the areas of business, the most prevalent leadership styles include; transformational. Transactional, laissez-faire as well as democratic leadership styles. Each of the mentioned leadership styles offers various advantages and disadvantages, and their successful implementation depends on their use at the most appropriate times.

Democratic/ Participative Leadership Style

In this form of leadership style, the decision-making powers are shared among the group members thus creating a notion of openness and transparency. The contributions of every member are valued and targets the attainment of goals and objectives in a firm (Seo et al., 2012). Democratic style of leadership offers several benefits. These benefits include; sharing of opinions, views as well as encourage open communication. As a result, it leads to the development of a collaborative organization. Lastly, it also increases innovation in the company. Although studies have indicated it as a beneficial leadership style, the difficulty lies in balancing what is needed for successful implementation. Therefore, it limits quick decision making which is essential in affirm. Furthermore, time is lost when trying to agree thus affecting productivity.

Laissez Faire Leadership/ Delegating Leadership Style

The above mentioned refers to a type of leadership where the leaders offer little or no direction to organization members. Therefore, in this form of leadership, the member has complete freedom to make decisions regarding their work (Rubin, 2013). A leader’s role in this situation entails facilitation of employees by providing their employees. Studies reveal that by allowing this, it leads to employee empowerment as well as development of a sense of responsibility which in turn impacts on their motivation (Rubin, 2013). It is highly effective where the workers posses’ skills in their respective field than the leader. Working independently as well as displaying in-depth knowledge and skills leads to higher employee satisfaction (Seo et al., 2012). However, this leadership style also has several disadvantages. The drawback is that it leads to the development of uncertainty feelings as a result of leaving the employees alone. Therefore, the workers tend to become uncertain of the work they are supposed to do. The situation is further worsened where there is little communication, as employees often become hesitant to approach their leaders when they are unsure which leads to them being less productive in their work.

Authoritarian/Autocratic Leadership

The above mentioned refers to a form of leadership where the leader takes the sole responsibility of making decisions as well as dictating the process and roles performed in an organization (Seo et al., 2012). One of the primary characteristics of an autocratic type of leaders is the ability to make their rulings as well as ideas thus the majority of the time they disregard their subordinates’ advice. One study asserts that this form of leadership style aimed at having total control over the whole organization (Seo et al., 2012). Therefore, the authoritarian style of leadership can be identified when leaders show the following characteristics. First, the leader makes changes that affect every aspect of the organization’s operation. Second, there is little input that is provided by the subordinates. Third, the atmosphere of the working environment is characterized by low levels of employee performance, lack of trust as well as lack of employee empowerment. Fourth, the main aim is the completion of a task (Seo et al., 2012). Hence, it can be observed that the implementation of an authoritarian style of leadership by a firm is costly as it has numerous losses in comparison to benefits. The form of leadership style is useful in situations that require meeting a deadline that is urgent and where there is lack of skills thus the leader has the sole responsibility of guiding the members.

Servant Leadership

Servant leadership style is a form of leadership where the leader of the group places the interests and needs of their workers before the needs of the firm. In this, the leader has the perception that by meeting the needs of his or her employees first, it will lead to the organization being successful. One of the attributes of servant leadership is encouragement of collaboration among the employees. Another feature is the provision of support to employees to achieve their goals. In this type of leadership style also, the decision making is left to both the employees and their leaders.

An advantage of servant leadership style is, it results in a collaborative firm which influences the levels of employee engagement. Additionally, the relationships also lead to the development of trust between the members of the firm which reduces their likelihood to leave. According to various studies, servant leadership is unique. Consequently, it is usually formed as a result of behavior patterns that have developed over a long period. Nevertheless, its implementation is dependent on the environment as it can be disadvantageous especially in a working culture that is hierarchical thus the leaders are required to pass down decisions. In such a situation, the head might often appear as incompetent and have problems in taking the respect of fellow workers.

The above mentioned refers to the commonly used leadership styles in business context. The common trend that exists between each, is that each applies to a specific context. However, since organization change needs leadership that takes the firm to a different status quo that makes the workers believe in the company’s long-term vision thus can become more tolerant in times of uncertainty, they are obsolete in this study. Additionally, there also lacks research that links any of the leadership styles with organizational change. Therefore, to answer the research question, the study will focus on two leadership styles that have the backing of empirical evidence. These two leadership styles include; transformative and transactional leadership styles.

Transformational Leadership Style

Hoon Song, Kolb, Hee Lee and Kyoung Kim (2012) define transformation leadership as a form of leadership style where the leader of the organizations is seeking to inspire his or her members. Consequently, it also entails engaging with the organizations members to motivate them to exceed their expectations (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012). Therefore, transformational style involves four main aspects. These aspects include; charisma whereby an ideal role model is developed for members to follow. Secondly, inspiration, therefore, for a leader to employ this type of leadership style they must have the capability of inspiring their members as well as motivate them to not only achieve personal but also professional objectives. Thirdly, consideration where it shows a concern for members needs thus pays attention to each member. Lastly, intellectual stimulation as each member is encouraged to exceed beyond their expectations (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012).

Several studies indicate that transformation leadership style not only increases an individual’s productivity but also facilities the engagement level of the worker (Rowold, 2014). The reason is because, by the action of taking an interest in employees’ well-being, transformational leaders inspire the development of feelings in the sense of ownership among their workers. In a study conducted to investigate daily employee engagement in organizations’, it was established that on the days transformative leadership behaviors was exhibited, the employees were more engaged as they became optimistic (Rowold, 2014). Transformational leadership is also described as that brings about change in people as well as social systems (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012). Therefore, it is evident that this type of leadership values the need for change. Hence, transformational type of leadership is best employed in situations where inspiration of the members is required (i.e. seeing the future vision thus enabling tolerance) which is instrumental for the betterment of an organization. Another study investigating the relationship between organizational change and transformation leadership indicated that there is positive relationship that exists between the two variables. The reason is because transformative leaders exhibit a high level of ethical and moral conduct. The leaders also are able to inspire their followers as a result of clearly communicating their vison. They also encourage team spirit which increases collaboration within the firms and the result is increased creativity and innovation. The result is that it impacts on the level of productivity thus advances the competitive edge of the firm hence increasing its easiness to adopt changes (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012).

Benefits of Using Transformational Leadership Style

Several studies conducted both in the private and public sectors reveal that transformational leadership style is the most effective as their leaders produce better outcomes in comparison to transactional leaders (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012). The main argument presented by the scholars is that the effectiveness of this kind of leadership is as a result of the leaders understanding the importance of adapting not only to the needs but also to their followers’ motives. Therefore, the leaders can get their followers to be inspired thus accomplish their assigned tasks as well as have their needs met.

Transformational Leadership Style Limitations

One of the limitations of using this leadership style is that it is founded on the capacity of the leader to inspire the employees. The workforce is encouraged to individually perform their best as well as collaborate with others to form a team for the good of the firm. However, organization leaders may fail to possess the character traits required to achieve the collaboration as well as inspiration (Hoon Song, Kolb, Hee Lee, & Kyoung Kim, 2012). The second limitation is that much emphasis is placed on the style of leadership rather than on the substance. Today, there is much emphasis on evide