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Study #2, Individual Level Performance

The second study focuses on the effect of pace and value on individual level performance. The sample comes from a fast growth software company that recently conducted an IPO (in 1996). The environment for employees is one in which there is a considerable amount of change, including a change in ownership as it moved from being a private company to a public firm.

An employee survey was conducted approximately one year before the IPO, and in that survey, I obtained a measure of employee value. A number of questions asked employees about the degree to which employees felt they were valued by the management team. After that, when the firm knew it was planning to conduct the IPO, we began to gather weekly data on the employee's pace of work, or the degree to which they were energized by their work. The data used in the study reported in this paper include 20 weeks of data, and the mean for each person is used in the analyses. Performance data are obtained at end of the first 20 week period of time. Therefore, the research design consists of survey data on employee value obtained at time 1, measure of pace obtained between time 2 and time 3 and then averaged, and a measure of employee performance obtained at time 3. Due to the longitudinal nature of the work, the sample for the final analysis is only 70 employees. The firm at time 1 had about 250 employees, and at time 3 it has over 400 employees. (A second measure of value was obtained at time 3, however, it is only one item (the degree to which you feel valued). The results with this one -item measure are identical to the results reported here.)

Employee Value

The measure of employee value focuses on the degree to which employees think that the management team values them, their opinions, and their work. The questions consist of five items, and employees responded using a Likert scale with 1 being strongly disagree and 5 being strongly agree. The items are: (1) management makes me feel important, (2) management listens to my opinions, (3) management lets me know that my performance on the job is important for the firm to succeed, (4) management acknowledges the w or k I do, and (5) management makes me feel like the work I do is important. Several other items were included in the development of an overall value scale that includes the degree to which coworkers value an employee, and the result of the exploratory and confirmatory factor analysis are the items reported here.

Pace

The pace at which the employee works, or the energy level expended in doing the job, is measured via a weekly measure that we called the company's pulse. It consists of a 10-point scale that is consistent with the concept of having a target heart rate where one is most efficiently exerting energy. (Copyright by Theresa M. Welbourne, 1996.) The 0 to 2.4 category is called the at rest zone, and in this area employees report they are not exerting much energy, if any at all, in doing their job. Newer employees report numbers in this category as do employees who are out sick, workers who are in between projects, and people who are upset with their coworkers or managers. During the holiday season, many employees reported in this area. The next range is called the aerobic zone, and it goes from 2.5 to 7.5. As the numbers increase, do does the degree of energy exerted and the efficiency of the employee. Basically, as they go up to 7.5, their pace goes up, and they become more efficient. The range from 7.6 to 10 is called the anaerobic zone, and in this area, employees are working so hard that they are becoming inefficient. A number of different analyses have been conducted with this data; in addition, I am working with a team of researchers to collect additional data for a validation study. To date, we have found that this measure is unique from other constructs such as job satisfaction, positive and negative affectivity, locus of control, and stress. In addition to its being r elated to performance (as will be discussed in this study), it also predicts student performance on exams. For the analyses in this paper, the mean pace of an individual over time was used (see Table 3).

Control Variables

A number of control variables used in other studies of performance were used. These data were obtained from the original employee survey and from the company's personnel files. The variables are: age, education, gender, and salary.

Dependent Variable

The company conducts quarterly evaluations of employee performance. Each quarter managers rate all of the employees with whom they have worked (not only their direct reports) using a 1 to 4 scale, although 4 is held out for a special quarterly award called top gun, therefore, it is infrequently used. The data used were collected at time 2, after the 40-week pace data were collected.

Analysis

A regression analysis was run. The control variables and independent variables were included in the analysis. In addition, an interaction term for employee value and pace was included in the equation.

Results

The regression analysis resulted in an R2 of .30 (F=3.79, significant at the .001 level), and the pattern of findings support hypothesis 2 (see Table 4). The interaction term is significant. An analysis that grouped the sample into low and high levels of employee value and low and high pace revealed the following pattern (see graph). Employees who were high on both pace and value had a mean performance rating of 2.98. Employees l ow on both variables had an average rating of 2.83, but the lowest ratings are associated with employees who were low on pace and high on value; that number is 2.78. For low pace employees, value resulted in a decrease in individual performance. However , for higher paced employees, value improved performance from 2.90 (low value group) to 2.98 (high pace and high value). The results support hypothesis 2, and they indicate there is a negative consequence for valuing employees who do not have a high energy level. This is consistent with protection motivation theory in that it states both energy level and coping are needed for desired performance. See Table 4 for the results of the regression analysis. See the graph (on next page) for results of the interaction effect.

FIGURE 3: INTERACTION OF PACE AND VALUE ON EMPLOYEE PERFORMANCE

Pace

    low high
Value low 2.83 2.90
  high 2.78 2.98

DISCUSSION

The variable being captured in these two studies, one at the individual level and another at the organizational level, could be called sense of urgency. It is the result of pace of work or rate of growth, and when combined with creating an environment where employees feel valued, it increases performance. According to protection motivation theory, the key to success is balance between sense of urgency and coping, and in this study I operationalized coping as valuing employees.

The results explain how fast growth firms can be successful. The results are also consistent with many of the case studies of fast growth firms with employee friendly practices. PeopleSoft and Starbucks Coffee are examples of successful firms that have supplemented their fast growth with a company culture that places the employee as key to success. PeopleSoft's lack of bureaucracy, including a no job description rule, and its impressive employee communications network, has been a formula for success in terms of stock price growth. Starbucks Coffee, in a completely different industry, has succeeded with a fast growth strategy that includes policies that make employees feel valued. Each worker, including part-time employees, have full benefits, and the stock ownership program includes all employees.

The results of this study seem to indicate that valuing employees can be a success strategy for fast growth firms. But what do the results mean for slow growth or perhaps downsizing firms? Most fast growth firms have a high sense of urgency due to the nature of their business. Their challenge lies in creating an environment that makes employees feel valued. Slow growth or stable firms have an even greater challenge because they need to create both the sense of urgency and the value environment. Given the fin dings at the individual level, this is critical, because increasing value while ignoring or even decreasing sense of urgency can lead to negative performance outcomes. Downsizing firms have an interesting dilemma. They can certainly create a sense of urgency, but the manner in which it is done (through layoffs, etc.) directly reduces the level of employee value. Many downsizing firms, in order to combat this, create programs that enhance value, but they may inadvertently lower sense of urgency. Additional research, both in smaller, fast growth firms like the IPO sample, is needed to further clarify what enhances employee value and how energy, pace, or sense of urgency translate into both individual and firm success.

There are, of course, several limitations that should be considered when evaluating the results and when considering future research. The somewhat different pattern of results for the two measures of employee value at the organizational level indicate that these measures may be capturing different phenomenon. In addition, the stability of employee value at the individual level is critical to understanding the findings in the second study. Although there are a number of questions, I hold that this work will help in our understanding of rat e of growth both for firms and for individuals.

The conceptual arguments used in this paper are different from what has been done in much of the macro human resource management research. The dominant paradigm claims that it is the fit between corporate strategy and employment practices (HR strategy) that results in higher firm performance. However, the theoretical arguments developed in this paper suggest that it is not fit that results in higher firm and employee performance. Instead, it is the ability of the management team to enhance sense of urgency (or pace) and employee value. This can be done in a number of ways, some of which are governed by the human resource department, and many of which are in the control of direct supervisors and perhaps even coworkers.

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