Empowerment of employees as a strategy for improving organizational performance - a comparative study between state sector and private sector banking institutions in sri Lanka

Abstract

This paper argues that employee empowerment promotes organizational performance. On the basis of a positive relationship between employee empowerment and financial performance of service firms identified by the existing literature, a research question was probed in this study to find out whether the high income growth rate of private sector commercial banks is due to a high degree of employee empowerment in those banks. This study attempted to answer this question by measuring the degree of empowerment in the state and private sector commercial banks in the country. Degree of empowerment was measured in terms offour factors: Power to make decisions that influence organizational performance. Information sharing on key aspects of organizational performance, Knowledge that enables employees to contribute to organizational performance, and Rewards based on organizational performance. The study, which was based on a questionnaire survey covering a sample of hundred front line employees in four banking institutions, concluded that the private sector bank employees are highly empowered than state sector bank employees. Thus it was suggested, when other factors remain constant, the high income growth rate of private sector banks has been contributed to some extent bv the high degree of employee empowerment. The empowered state of mind of private sector hank employees would help to delight customers by exceeding their expectations. Increased customer satisfaction, customer retention, and expansion of market share might have resulted in the increased financial performance. The implication of the study for managers and executives is that they need to introduce planned change in their organizations with the aim of disseminating power, information, knowledge, and rewards among subordinates; the process often referred to as empowerment of employees.