Leadership and Employee Engagement in organizations: an analysis on correlation

Abstract: The Purpose: Leadership plays an important role in organizations towards driving the growth and success. And employee engagement is considered a key factor for organizational efficiency, success and achievement. Existing literature defines drivers of the employee engagement from different angels and commonly relates a portion to leadership skills, especially of the immediate managers. Our purpose is to strengthen the literature that relates leadership to organizational success by leadership positively effecting employee engagement. Our case is to investigate the nature and the magnitude of the correlation between Leadership and Employee Engagement, witness the existence or non-existence in our example organization. Our research hypothesis is - “Effective Leadership in organisations leads to an increased level of Employee Engagement”.   The literature and the method: First, the related literature is reviewed. We focused specifically on the literature investigating the relation of our two variables i.e. Leadership and Employee Engagement. Next, for our research, we analysed the existing data from the survey reports of AB Volvo Penta for which we have been granted access. The company is long established, multinational and have its corporate culture with focus on both leadership competences and employee satisfaction. Key findings: Congruent with the reviewed literature, the 2015 survey results of AB Volvo Penta shows that the two variables are correlated. The two indexes, namely Leadership Effectiveness Index (LEI) and Employee Engagement Index (EEI), are showing close relation within 146 departments measured. The survey results provide an interesting commonality, about the importance employees give on the behaviour of their immediate leaders which is eventually impacting their engagement at work. The commonality also leads to the fact that focusing on increasing leaders skills would increase employee's engagement. Originality/value: The relationship between Leadership and Employee Engagement is explored theoretically and tested empirically in an isolated organizational structure.