Why Employee Empowerment Leads to Competitive Advantage
Under the current economic circumstances, companies are under more pressure than ever to innovate if they want to survive. Conversely to what some people think, innovation doesn’t always come from the R&D division but ideas are more likely to originate with employees closer to the bottom of the organisational pyramid. As a consequence, employee empowerment has arisen as one of the recommended management practices to foster innovation in an organisation.
Employee empowerment is a strategy to obtain competitive advantage in a changing industrial landscape. This is of particular importance in customer-centric or innovation-driven companies, where human capital is the most important asset. Ultimately, technologies and processes can be copied by company’s competitors, but matching a highly motivated workforce, comprising of people who care about the work they do, is much more difficult, if indeed possible at all.
What is Empowerment and Why is it Important?
Employee empowerment is the planned and systematic process of shifting power, authority and responsibility from managers to employees at a lower level in the organisation’s hierarchy. Having said that, just because the traditional model is not in place, that doesn’t mean that management doesn’t exist.
Employee empowerment gives employees autonomy and, therefore, the responsibility to make decisions regarding certain organisational tasks. It enables decisions to be made at the lower levels of an organisation where employees may have a unique view of the issues and problems that the company is facing. Moreover, it can enable decisions to be taken by the individual that is the closest to the relevant data, often enabling a higher quality decision to be made.
Managers nevertheless may find it difficult to put employee empowerment into practice due to the factors such as their own contaminated ego states, their autocratic approach or the organisational culture in which they operate. Servant leadership is a management style that facilitates the fulfilment of the management pre-conditions for empowerment.
What is Servant Leadership?
Emerging leadership theories suggest that the true power of a leader is no longer linked to the leader’s position within the organisation, but rather to transforming the organisation and its workers (Stone & Patterson, 2005).
For Greenleaf (1977), servant leadership means being servant first, which begins with the feeling that one needs to serve others. The ‘servant-first’ is a type of leader that makes sure that other people’s highest priority needs are being served. Dierendonck (2011) says that servant leadership is proven by empowering and developing people by expressing humility, authenticity and stewardship; and by providing direction.
The Impact of Employee Empowerment
The psychological impact of employee empowerment can be defined as “a state of mind in which an employee experiences the feelings of control over how the job can be done, have enough aware to the work tasks that being performed, a great level of responsibility to both personal work outcome and overall organizational advancement, and the perceived justice in the rewards based on individual and collective performance” (Melhem, 2006). In essence, placing personal responsibility on each employee ensures that these workers take ownership of their actions.
Empowerment makes the individual feel that they have crucial and contributing role to play in the achievement of an organization’s goals. Employees with strong organisational commitment are likely to develop an emotional attachment to their organisation, feel happier and have greater aspirations to make meaningful contributions.
With empowerment and personal responsibility in place, the individual feels more able to speak up and have their voice heard. As a consequence, an injection of new ideas can be fostered, enabling successful process improvements and new policy developments to be realised.
Employee Empowerment: the Ultimate Competitive Advantage
To remain competitive in their respective markets, companies need to work to develop and sustain competitive advantages. According to Porter (1985), greater value can come in form of lower prices or providing additional benefits that justify a higher price.
One way in which a company can achieve a competitive advantage is through producing quality products and services. The commitment to quality in today’s environment is prominent in service industries, non-profit ventures and educational institutions (Boone & Kurtz 1998). In order to produce quality outputs, companies aim at getting things right from the beginning as well as during production, rather than having inspectors resolve issues with defective products at the end of the production cycle. Hence, the best people to perform this control are the workers themselves. However, problems arise when workers don’t have the freedom or necessary skills to effect change themselves (Sashkin & Kiser 1993).
One of the principles of the Agile Manifesto is that the best architectures, requirements and designs emerge from self-organizing teams. These teams are responsible for the development of both internal and consumer-facing products that a company launches to the market to achieve competitive advantages. They should, therefore, be self-managed, able to solve problems, make choices on schedules and operations, teach other employees, and learn other employees’ jobs, and be ultimately responsible for the quality of their outputs. In such teams, when a defect in quality is identified, it rarely proves to be due to a particular employee’s decisions. The causes are often traced back to incorrect product or system designs, or inappropriate training received by the employees (Heiser & Render 1999).
Barney and Wright (1998) argue that firms must be organised in a manner that enables them to take full advantage of their resources. Human resources must have an integrated set of practices to motivate individuals to excel in their performance to produce value that is rare and inimitable. One way in which the human resources (“HR”) division can achieve this is by developing programs to make sure that human capital is utilised to maximise output. For instance, by promoting from within the organisation, or by encouraging periodic job rotations in order to develop individuals that hold a holistic view on how the company does business. HR can also actively seek for internal candidates to fulfil open positions based on their profile and experience.
Research has found a strong correlation between employee empowerment and innovation. The empowering of employees is instrumental in the sense that it provides them with the independence to act in new and creative ways that can go against the organisational standards (Fernandez & Moldogaziev, 2013). An example of this are the ‘hackathons’ that some companies organize. In a ‘hackathon’, teams of engineers are asked to come up with an idea for a product to be conceived, designed and built within 48 hours. The only requirement being that a finished product that can be launched into the market after this time is produced. These initiatives prove to have a positive impact in employees recognition and motivation, by shifting the decision-making process of what to build and how to build it from managers to employees.
- Employee empowerment provides some distinct advantages in relation to employee satisfaction, commitment and productivity. By being empowered, employees are able to align their professional growth with organisational goals since the former can take some degree in ownership in the decisions taken towards that goal achievement. This, at the same time, has positive effects towards the intrinsic motivation of individuals, and enables for an increase of retention rates of employees.
- Unlike top-down hierarchical leadership styles, servant leadership enables collaboration, empathy and ethical use of power. Servant leaders are, at heart, servants first by taking the conscious decision not to increase their power rather than empowering others. It’s easy to see how empathy, awareness, persuasion, foresight are characteristics of leaders of this kind.
- The organisation has the responsibility to create an environment that fosters creativity and a desire for employees to be empowered. It also has the duty to remove barriers that limit their managers to try and empower their subordinates. Managers can then employ this process, in effect crystallising more autonomy and decision making by employees.
- Employee empowerment enables companies to design a culture that helps to build and sustain unique competitive advantages. This quality-focussed culture makes employees and teams a lot more committed and able to inspect, adapt and improve processes in the pursuit of excellence and peak performance. It creates energy and excitement, and people take great pride in their products. The payoff for this disciplined quality program includes not only motivated employees, but also higher sales, greater customer loyalty and true competitive advantage.
How does your company promote employee empowerment, and what are the effects that it has in commitment, employee turnover and innovation?
Barney, J. & Wright, P.1998. On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management, 37(1), 31-46.
Boone, L.E. and Kurtz, D. (1998). Contemporary Marketing. Texas: The Dryden Press.
Dierendonck, D.V. (2011), ‘Servant Leadership: A Review and Synthesis’, Journal of Management July 2011 vol. 37 no. 4, 1228-1261.
Fernandez, S., & Moldogaziev, T. (2013). Employee empowerment, employee attitudes, and performance: Testing a causal model. Public Administration Review, 73, 490–506.
Greenleaf, R. K. (1977). Servant Leadership. Mahwah, NJ: Paulist Press.
Heiser, J. and Render, B. (1999). Principles of Operations Management. New Jersey: Prentice Hall.
Marshall Sashkin and Kenneth J. Kiser (1993). Putting total quality management to work: what TOM means, how to use it & how to sustain it over the long run. Berrett-Koehler Publishers.
Melhem, Y. (2006). Prerequisites of employee empowerment: the case of Jordanian mobile phone companies. Jordan Journal of Business Administration, 2(4), 585-598.
Porter, M. 1985. Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York.
Stone, A.G., & Patterson, K. (2005). The history of leadership focus. Virginia Beach, VA: Regent University.