Employee Perceptions of Stakeholder Focus and Commitment to the Organization

Abstract

Today's increasingly competitive business environment requires that companies find new and improved strategies for achieving superior financial returns. In a world in which technology has driven down production costs and made new goods and services easier to imitate, firms must look for less traditional ways of staying ahead of the competition. Reichheld (1996) contends that increases in customer, investor and employee loyalty offer enormous potential for enhancing a firm's performance. Davis and Landa concur and further point out that loyalty, the outcome of superior customer service, and investor loyalty, the outcome of protected and enhanced shareholder value, are each dependent upon the business gaining the commitment and loyalty of its (2000: 4). Their view of committed employees as key success drivers is supported by Pfeffer (1998), who says strategies that put workers first result in higher productivity, greater flexibility, improved customer service and other outcomes related to financial performance. Given its practical significance, it is no surprise that, according to Mowday (1998), employee commitment has been the subject of voluminous academic research. He suggests that the topic is of greater importance today than it was in the past, and notes that while employee commitment to an organization is more critical than ever in gaining competitive and financial advantage, organizational commitment to employees is actually declining. He cites widespread corporate downsizing and cost cutting as two examples of this phenomenon. Baruch (1998) argues that this lack of organizational commitment to employees has, in turn, diminished employee commitment to companies. Corporations have long understood the importance of commitment to shareholders and have embraced the concept of shareholder wealth maximization as the purpose of the firm (Serven, 1999). Over the last decade, the concept grew in significance as financial analysts applied mounting pressure on firms to build shareholder value in the short term by increasing quarterly profits and earnings (Fox, 1997), often through cost-cutting measures involving employee dislocation or downsizing. Likewise, the importance of the customer has grown among market-driven companies who believe that pursuing relationships--rather than transactions--with buyers can create a source of predictable and valuable revenues (Berry, 2001). Such companies have invested in customer-relationship management, data mining and other sophisticated technologies designed to assist them in determining who their customers are, what they want, how they can be better served, and how they can be prevented from defecting to the competition. Regardless of whether corporations put shareholders, customers, employees or some combination of the three at the heart of their business missions, it is the employees themselves who must develop and implement strategies and tactics designed to create value for all the groups (Bowden, 2000). As a result, organizations now routinely claim that people are their greatest asset, but few practice what they preach (Mowday, 1998). According to Guaspari, businesses suck more and more from people's lives (1998: 20), engendering a growing sense of dispiritedness as employees are forced to do more for the same or less money. Previous research on employee commitment to the organization has examined, among other factors, employee perceptions of how they are treated relative to internal and external peer groups only. However, if it is true that organizations are directing more and more attention to customers and shareholders, then it would be worthwhile to examine employee perceptions of the organization's stakeholder focus and the impact of these perceptions on workers' commitment to the organization. A focus on shareholders and customers, rather than on employees, might be seen as a lack of organizational commitment to workers, who might then be expected to be less committed to the firm. …