Keywords

9.1 Introduction

The organizational competitiveness in turbulent and global environments depends on the success of individuals and employees who, by implementing their skills and accumulated knowledge in the work process, ensure the achievement of the organizational goals and contribute to all stakeholders’ satisfaction. Important factors in the organizational performance are financial and working assets, but the factor that separates the more successful from the less successful organizations are the employees, their knowledge, motivation and competence, which create the organizational long-term competitive advantage. It is precisely because of the great importance of employee performance management that this area and the methods of managing the organizational success and employees have attracted attention of both theoreticians and practitioners from the field of work psychology and the theory of motivation over several decades. If the employees and the organization are successful, all stakeholders win. Owners get better results because employees are oriented towards the realization of organizational goals and strategies; managers are more successful because their subordinates successfully carry out their tasks and, last but not least, employees are satisfied since they are more successful than earlier, their employment security is higher, they have greater career opportunities promotion and insofar as the organization has established an appropriate system, they are also better or additionally rewarded for their work results (Armstrong 2015; Ashdown 2014; Harvard Business Essentials 2006). The employees’ individual work performance is closely related to the activities that the company implements in the field of CSR as the employees are essential parts of the organization and are highly influenced by the organizational CSR initiatives (Ho 2012). Researchers also suggested that CSR is an area of corporate concern that should not be left out (Galbreath 2006) and is essential to organizational overall strategy (Young and Thyil 2009).

Various CSR research tackles employees, but mostly focuses on how CSR benefits the organization by attracting potential employees. Research showed that CSR is positively related to organizational reputation and attractiveness as employers (Ho 2012). But there are rare evidence on the effect that CSR initiatives have on employees and how their perceptions affect their performance and their internal motivation (Zore 2015).

Here, we report on examination how the promotion of CSR values through an organizational culture influences the organization. The main purpose of our contribution is to explore the interdependence between CSR and employee performance management, and how one can influence the development and improvement of the individual and organizational success through the promotion of CSR. Therefore, the goal of the chapter is a better understanding of how employees’ perceptions of CSR affect their performance.

In the chapter, we highlight the problem of individual performance based on the thesis that with internal measures in the field of CRS we can contribute to increasing and improving the individual performance of employees, as well as to increasing the effectiveness of achieving the goals of the organization and reducing the neurological response of the “battle or flight” (Rock et al. 2013). We are also discussing the correlation between the measures in the field of socially responsible behavior of the company and the internal motivation of employees, which is one of the key elements for improving the performance of employees.

The purpose of the chapter is to provide the basis for the above-mentioned conscious actions concerning social responsibility and aimed at positive influence on the individual employees’ performance and motivation.

For the introduction, we present the key theoretical starting point, the concept of managing the employees’ performance and connect it with HRM and with theories as the basis for managing the employees’ performance. Due to differences in performance management systems during the past years special chapter was dedicated to transition from traditional to new performance management system, because these changes are closely tackling the need aligned to CSR activities to employees.

The theory is followed by the definition of CSR and the link between the CSR and the performance management of employees. In the discussion and conclusion, as the final part of our chapter, we give key findings and guidelines including starting points for further research.

Based on theoretical starting points and research results of qualitative research, we will prove the following hypothesis:

H1:

Promoting CSR measures positively influence the improvement of employees’ performance.

9.2 Methodology

The chapter focuses on a qualitative survey including the analysis and interpretation of the data obtained. We used methods of compilation, analysis, comparison and synthesis of accessible professional and scientific literature. The method of compilation was used in the review and study of professional literature and summarizing of the observations, findings, views and conclusions of various authors. The analysis was used for understanding the data obtained, which we compared to each other and used the method of synthesis in the conclusion. We have systematically searched for the relevant literature in the databases dLib.si, ProQuest and Cobbis.si. In our search for scientific bases and theoretical starting points we used keywords: employee performance, corporate social responsibility, employee, motivation. We also expanded our search to literature on the theory of human resources management and management.

Dialectical system theory is also a qualitative method designed to raise awareness of all the essential and only essential aspects, their interactions and synergies, and the consideration of their interdependence (Mulej et al. 2013). We used it in the analysis and synthesis of research findings.

9.3 Theoretical Backgrounds

9.3.1 Employee Performance

The beginnings of managing the employees’ performance in companies relate to performance evaluation systems (Performance Appraisal), which are still found in organizational managing the employees’ performance. Nevertheless, in recent times, we can see that this concept in the organizational practice is already replacing the performance management system, where it no longer focuses on how we will evaluate employees’ or organization’s performance, but rather, how to ensure the process of continuous improvement of employee performance (Ashdown 2014).

In practice, employee performance management systems are often build on goal setting and management by objectives. Therefore, drawing attention to the important differentiation between the two concepts matters. Employee performance management is not management by objectives, as the performance managment is not only about the goal setting, but abou ways to achieve the expected results. Therefore, employee performance management is a broader concept, being actually employee management by allowing employees to achieve the expected results (i.e. matching expectations, explaining the desired behavior, setting standards and goals). The responsibility for the realization of strategic and individual goals is not only with managers/organization; each individual must undertake it, striving to maximize one’s own performance. The fact is, the realization of the individual goals is more successful, if he/she is involved in setting them. Otherwise, the goals are not motivational, and therefore there is less chance for employees to believe in them and strive for their realization (Armstrong 2015; Ashdown 2014).

The leading author in employee performance management is certainly Armstrong (2014), who says that effective employee performance management systems help to achieve changes in culture and are integrated with key HRM activities, particularly employees’ talent management, training, development, and rewarding.

The selected definitions of the employee performance management concept are presented in Table 9.1.

Table 9.1 Definitions of employee performance management system
Full size table

In Table 9.1, the presented definitions define the employee performance management system as a system coordinating the organizational and individual goals and employee behavior for the realization of the set organization goals and achievement of its performance.

Some authors, however, are somewhat distant from the original definition of employee performance management system and associate management with employee affiliation and motivation for the realization of goals (VerWeire and Van Den Berghe 2004).

Shields (2007) links performance management with two strategic objectives. The first objective is to communicate organization’s strategic objectives, which refers to the definition of expectations regarding employees IDUs. The second strategic objective covers construction of a relationship between employees and managers. Ones’ involvement in the process of planning the performance and rewarding of both employees and managers improves dialogue between them and the provision and consolidation of mutual trust (ibid.).

Ensuring the success of the performance management system should not be based on control (this should be the exception rather than the rule), but on development and growth of employees and relational relationships between employees, based on maximizing current and long-term benefits (summarized from Armstrong 2015).

The concept of performance management also includes the definition of activities and the setting of criteria (work results, behavior, and capabilities) of employee performance management; it covers all key factors that matter for the realization of the goals set and for achieving the long-term success of the individual. An integral part of the employees’ performance management is also the monitoring of work performance, which can either be measured (measurable) or assessed (assessment, appraisal). One measures performance when the organization has criteria (unit of measure) and measurement tools; one evaluates when there are no specific assessment tools, and the judgments are subjective. The biggest challenges include performance conceptualization, operationalization and measurement, since it influences decisions in the process of managerial quantification and comparison of the each employee’s contribution, and the resources allocation (Luthans et al. 2007; Zupan et al. 2009).

Performance measures in manufacturing companies showed that they strongly influence human behavior; besides, the system of measuring performance enables organizations to develop a consistent pattern of individuals’ behavior at work (Andrews-Hanna et al. 2007). An inappropriate performance measurement system causes inappropriate behavior; therefore, the design of a performance measurement system belongs to the core business activities (Veingerl Čič 2017).

Performance management criteria can cover input or output. The input criteria are behavior and abilities, while the output criteria are the results of the work. In fact, a successful combination of performance requires a combination of both, although in practice, too much focus is put on the output quantitative criteria (Oliver and Anderson 1995). Such a focus is narrow, since one cannot set objective measurable targets for all jobs; behaviors and abilities that are closely related to the innovative activity are much more important in individual jobs. The main obstacle to the behavioral criteria is the evaluators’ subjectivity and regularity of the evaluation, especially when people do not perform multiple tasks I one job, but participate in different projects and teams (Armstrong 2014; Zupan et al. 2009).

9.3.2 Theories as the Basics of Performance Management Systems

Ashdown (2014) and Armstrong (2014) combine the company’s performance management systems with three theories:

  1. 1.

    Goal theory,

  2. 2.

    Theory of expectations and

  3. 3.

    Control theory.

9.3.2.1 Goal Theory

The goal setting theory is based on a causal link between an individual’s goals and behavior and the belief that individuals are more motivated to work, if they have set challenging goals. This is not enough; goals must be challenging to motivate individuals appropriately. Difficult and specific goals result in a higher level of performance than simple goals (Locke 1976). Therefore, the objectives must be realistic, objective and challenging for employees. Objectives that are difficult to realize can be more motivational, but they must be perceived as achievable, which leads to greater acceptance of the goal; if one feels that one cannot control goals, they pose stress and cause one’s failure (Armstrong 2014).

The goal theory highlights four mechanisms linking the performance objectives and results: (1) focusing attention on priorities (which leads to persistence of tasks and the development of project strategies to achieve the goal); (2) stimulating effort; (3) ensuring the employees’ knowledge and skills, increasing the chances of success; and (4) encouraging the use of individual’s different skills, abilities and competencies.

This theory refers to performance management by defining and accepting goals. Studies showed that the employee needs both employer feedback and self-efficacy (belief in one’s ability to achieve goals), to make setting goals effective (Armstrong 2014). Because the theory focuses only on setting goals, numerous studies showed that setting goals in tasks that require creativity and improvisation can have opposite effects (Staw and Boettger 1990, summarized by Armstrong 2014). Therefore, setting goals in some cases and in certain types of tasks is harmful. In creative and complex tasks that require the individuals’ narrowed attention, setting goals can actually inhibit the mental process, as the goals require the use of cognitive resources. Similarly, when one learns a new task, the performance goals can be discouraged from the learning process, since it may be better to concentrate on managing the task rather than achieving a certain result (Mitchell and Daniels 2003). In addition, too many goals can become distracting and unproductive, especially if goals are opposed (Armstrong 2014).

9.3.2.2 The Theory of Expectations

Another theory is the theory of expectations, which arises from the assumption that individuals are more motivated to work, if achieving their success significantly impact achieving the desired rewards (summarized after Lunenburg 2011). The theory of expectations is based on the connection between achievements, success, and fair rewards. According to this theory, employees will work smarter and/or perform harder work, if they are convinced that their additional efforts will result in an appropriate prize (Lunenburg 2011).

The theory of expectations proved useful in shaping the reward system. If the awards are consistent, clear and honest, they mean a lot to employees. A prerequisite for motivation is that employees themselves determine the attractiveness of prize/s. In some cases, the prize may also be unattractive, if the condition for it is an increased workload, or a challenging journey, as a prerequisite for advancement, e.g., when individuals estimate that their private life is as important as their professional life. It is essential that the theory of expectations presupposes that employee satisfaction results from success, rather than cause success (Armstrong 2014).

9.3.2.3 Control Theory

Control theory focuses on feedback as a means of shaping behavior. When people get feedback on their behavior, they get information about the gap between their practice and organizational expectation. All this is the basis for taking remedial measures to overcome discrepancies. Therefore, feedback is a key part of the performance management process (Armstrong 2014).

Armstrong (2014) adds to these theories the social cognitive theory developed by Bandura (1986). It is based on the central concept that cognitive and learning processes, especially social learning, are influenced by the design, maintenance and changing behavior of individuals.

The individual’s behavior results from the interaction between a person’s characteristics (emotions, cognition, moves) and the situation (Musek 1993). This means that what people believe they can or can not do is greatly affecting their performance. This theory offers an important concept of self-efficacy in explaining the level of employee motivation concerning job, tasks or goals. Employees with a high level of performance are convinced that their effort will most likely lead to success; therefore, their expectation of success prepares them for more efforts to achieve the goals. This is influenced by expectations, qualifications or past experiences (Musek 1993).

High expectations can lead to improved performance (Gomboc 2011). In fact, this is a self-fulfilling prophecy that was first presented by sociologist Merton (1948, summarized after Gomboc 2011), who defined it as a situation in which the expectations of one person (or group) about another person (or group) lead to the realization of these expectations. This phenomenon is known as the Pygmalion effect (White and Locke 2000; Sterling 2003), emphasizing the development of a (positive) individual’s self-image based on encouraging expectations and the environment, trusting in an individual’s ability. Positive expectations cause trust in the ability of target persons. On the basis of relations with him, an individual should build different images about himself. For example, the stimulating behavior and positive expectation of the superior to the subordinate, unconsciously influences the behavior of both the superior, and the subordinate, and consequently leads to better individual’s results. On the other hand, low expectations can reduce self-efficacy. This effect is called the Great Impact, which happens when the achievements and abilities of a particular person (or group of individuals) deteriorate due to the negative expectations of others (Gomboc 2011).

For the successful realization of the goals one must develop the relations based on the long-term relationship between the individual and the organization, aim at maximizing the long-term and current benefits. Armstrong and Baron (2004) associate employee performance management systems with a focus on dialogue, common understanding, and commitment between the employee and the manager in terms of managing an individual’s performance (Torrington et al. 2011, p. 269). Therefore, work performance is conceptualized as a multidimensional concept consisting of several forms of behavior.

The most important roles in managing the employees’ performance (Armstrong and Baron 2004) are:

  • Communicate a common vision of the purpose and values of the organization,

  • Identify expectations on what must be achieved and how,

  • Ensure that people are aware of what performance is and how it must be achieved,

  • Increase the motivation, commitment and belonging of employees by providing the necessary resources and feedback,

  • Enable employees to monitor their own performance,

  • Encourage dialogue on what must be done for improvement.

Armstrong (2014) distinguishes traditional and modern employee performance systems. The traditional systems use a top-down approach: the attitude of a manager is hierarchical in terms of a relationship from a child-to-parent transactional analysis. In the modern systems performance management is a process of building a mutual understanding of what we want to achieve and how (ibid.). Below we will explain the difference between traditional approaches to IDU management and new approaches.

9.3.3 Transition from Traditional to New Performance Management System

From the 1950s, one used more or less similar approaches to measuring performance, with traditional approaches aimed primarily at assessing the past employees’ performance. Traditional ways of regulating the of employees’ performance rank and evaluate employees in comparison with his colleagues. They were ineffective and terminated as methods of balancing employee performance, demoralizing employees, creating hatred between them, and encouraging prospective and key employees (talents) to start looking for work elsewhere (Barry et al. 2013; Garr 2011).

On the other hand, today’s business environment does not follow the annual development cycle (such as the evaluation of employee performance on the basis of annual interviews), but goals and strategies change during the year. Also, due to the diversification of work, individuals are involved in various projects, they rotate in different workplaces during the year and have various leaders. This additionally limits an individual’s performance assessment in the course of annual interviews based on a manager’s assessment. If there are more leaders, the question is who should competently assess and what goals are “right”. The more successful companies assess implementation of their objectives more than once a year (Deloitte 2015).

This reflections should also include the findings of neuroscience, representing an important milestone in thinking and explaining the failure of traditional systems for managing the employees’ success (Swart et al. 2015). Neuroscientists found that the marking or stigmatization of employees with a numerical rating can be ungrounded. The label is successful or unsuccessful, or its classification according to certain criteria creates a response that neuroscience calls “fight or flight” (Rock et al. 2013). This neuronal response usually occurs when there is a direct physical threat to an individual, which in many cases makes people react quickly to perceived dangers and rewards in the social environment in the same way and with the same intensity as responding to physical threats (e.g. the predator, pain) and awards (e.g. food, money) (Bossman 2012). (Rock 2008) explained this phenomenon by the so-called scarf model (eng. SCARF), which defines why the success of the rankings in the brain of employees triggers a “fight or flight” response. The model is based on the assumption that five organizational factors have a huge but often invisible influence on negative human reactions. These factors are: (1) status (perceiving whether we are better or worse than others), (2) certainty concerns ability to predict the future events, (3) autonomy (the perceived degree of individuals’ control over their lives), (4) relatedness (a sense of safety with others—of friend rather than foe or to share goals with others) and (5) fairness (the feeling of being respected and treated equally like others). When the perceived level of these factors is low, people feel threatened and upset. Even if they do not express it, there is a feeling, often weakening their productivity and belonging to the company.

If these thoughts are summarized, awareness of the change in existing performance management systems is necessary. McGregor (2013) suggests ways to modify existing performance management systems:

  • The complete elimination of annual evaluation interviews and the introduction of real and more frequent feedback;

  • Abolishing the rating scales that create competition between employees. Instead, employers rate employees on the basis of their personal goals;

  • Transforming the system of bonuses and rewards into more personal rewarding of employees.

Employees’ job performance received wide attention in literature and research due to its importance, since every organization aims at higher performance (Ojo 2009). Performance activities must always ensure effective and efficient goals achievement (McNamara 2005). Employees’ performance covers the observable behaviors and actions which explain how a job is done, plus the results that are expected for satisfactory job performance (Albasu et al. 2016).

Performance Values—purpose of performance standards is to communicate expectations, and often behaviors determine whether performance is acceptable (Cardy and Selvarajan 2004). Employee’s performance is a process for establishing a shared workforce’s understanding about the necessary organization achievement.

Development of standards: employees are involved in the development of standards; performance standards should form the basis for performance evaluation that clearly states how employees would be recognized when expectations have been met, exceeded, or not met (Gruman and Saks 2010). Performance standards should be position oriented and not individualistic; they should be visible, with anchored indicators for success, which may be expressed in terms of quantity, quality, and within time frame (Armstrong 2006). In this case, standards are the criteria against which performance is judged; these standards should be achievable, unique, monitored, purposeful, measurable, and stated in terms of quality, quantity and time.

9.3.4 Corporate Social Responsibility (CSR)

European Commission’s definition of CSR (2018) says that CSR refers to companies’ responsibility for their impact on society. The European Commission believes that CSR is important for the sustainability, competitiveness, and innovation of EU enterprises and the EU economy. It brings benefits for risk management, cost savings, access to capital, customer relationships, and human resource management.

CSR is a complex concept aimed at encouraging companies to be more aware of the impact of their business on the rest of society, including their own stakeholders and the environment (Financial Times 2018).

There are various aspects of how organizations can use CSR to influence and attract potential employees, include its employees in CSR activities from planning to realisation in order to increase their loyalty and engagement. In this chapter we will only focus on the CSR practices aimed directly to the employees, their wellbeing and satisfaction, which may result in their better performance.

CSR is the way in which organizations consider the financial, environmental and social impacts of their decisions and actions. It is an increasingly important issue in business, as managers, consumers, investors and employees have begun to understand how economic growth is linked to social and environmental well-being (Nyameh et al. 2014). CSR is a determinant factor for any organization desiring viable sustainability. CSR is a mostly voluntary concept, but there is increasing pressure on organizations to make a positive contribution to society, or at the least, reduce their negative impact. Organizations may not tend to measure the positive impact of their behavior on their performance; however, some organizations are likely to understand the negative impact the business decisions have on their employees. Business sustainability depends on organizational considering the social and environmental consequences of their decisions. Many businesses and managers in the past were primarily concerned with increasing shareholders’ value. Developing, understanding and implementing of CSR into one’s business speedily helps business organization to outperform their competitors. CSR can be used as a gain over competitors and provide an opportunity to get benefits at higher range for business stakeholders (Perlman and Hughes 2008).

In today’s competitive business world, managing employee turnover is considered an important task for any organization. Naturally, people want diversities in their everyday life. They seek new and challenging jobs and good working environment. To meet these requirements to the employees in an economic way is very difficult and cumbersome. But it is also crucial for any organization to retain its talented employees. Every organization wishes a high productivity, profitability and fewer turnovers. Managing turnover successfully is a must to achieve the goals (Franco and Suguna 2017).

The Green Paper on CSR (2001) promotes European guidelines for CSR; it deals with employees as important parts of internal dimension of CSR. Companies, able to satisfy the interests of their employees and through this, to engage optimally their entire creative potentials, are aware that employees (human capital) today undoubtedly are the main factor of organizational competitiveness. The conditions, enabling the release of employees’ potential include their job satisfaction and relation to work. Therefore, the major challenge for organizations today still includes attracting and retaining skilled and ambitious workers. In this context, the company must take relevant measures including lifelong learning, employee empowerment, better information throughout the company, better balance between work, family, and leisure, greater work force diversity, equal pay and career prospects for women, profit sharing and share-ownership schemes, and concern for employability and ob security. The active follow-up and management of employees who are off the work due to disabilities or injuries can also result in firm’s cost savings.

CSR to employees covers (Green Chapter 2001, pp. 3–4):

  • Concern for education and career of employees,

  • Provision of adequate working conditions and equal treatment of all employees,

  • Programs of health care and retirement plans,

  • Appropriate payment systems, reward programs and ownership,

  • Organized childcare,

  • Attitudes towards women, ethnic groups and people with disabilities in matters of employment, etc.

The company aiming to pursue the concept of CSR should lay the foundations in values, culture, ethics, norms, and climate of the company.

Employees must feel important and pursue their own professional development and career opportunities. If one wants to implement this concept, interpersonal relations and communications are crucial because in terms of CSR climate and culture in the organization, employees must be regularly and accurately informed, and familiar with the disclosure of information concerning them. These are information about employment, salaries and payments for social security, health and safety at work, working conditions and training, education, and trade union activities.

In terms of CSR, accurate information and regular, open communication is insufficient, though. Socially responsible company will offer its employees more benefits than it is obliged by legislation. Exceeding legal obligations is the core of all CSR aspects. Basic postulates for CSR towards employees are described in the Green Paper, but there are no limits upwards to what a company could offer to its main stakeholders. Thus, the organization will achieve a competitive advantage and differentiation from other companies.

Employees are the main carriers of knowledge and the most important primary stakeholder group of the companies, along with owners and managers. The company, which is aware of employees’ influence, treats them socially responsibly, because managers know that every employee will contribute his or her added value to the company’s success.

9.3.5 Corporate Social Responsibility and Employee Performance

Another stream of research works on relationship between CSR and employee-related outcomes, such as organizational justice, organization-based self-esteem, in role behavior, performance, and turnover. We will focus on relationship between CSR and employee performance.

Performance is a fundamental issue for companies in relation to competing on a global scale, therefore due to these circumstances companies must review and rethink their managerial practices and corporate structure in order to realize significant increases in business efficiency and performance. The factors, influence performance most are related to both organizational and human aspects. The degree of social cohesion can often affect business and employee performance, positively or negatively; trust, shared values and responsibility, transparency and confidence (Stainer 2006). The way in which companies conceive and implement CSR has undoubtedly implications for both employees and human resources managers (Voegtlin and Greenwood 2016). CSR can help, on the one hand, to motivate employees, favor commitment and organizational identification (Shen and Zhu 2011), and, on the other hand, to define goals for performance management that can be further connected with rewards for employees or even introduce standards for decent work (Mariappanadar and Kramar 2014). HRM impacts employee performance through its influence on employee attitudes, commitment and behaviors (Shen and Zhu 2011). CSR therefore involves the development of practices, policies and strategies that take into account the consequences of the organization’s behavior on a variety of stakeholders to improve their social performance, gain organizational legitimacy and achieve long-term competitiveness (Newman et al. 2016). In this regard employees are central stakeholders of CSR (Fenwick and Bierema 2008); therefore one of the major dimensions of CSR targets policies and practices related to employees (Lechuga Sancho et al. 2018). CSR positively relates to employee attitudes and performance (Bashir et al. 2012). Thus, continuous training and development, communication and transparency, diversity and equal opportunities, reconciling work and family life and attention to employee performance can be an added and differential value in the treatment (Lechuga Sancho et al. 2018).

HRM policies, many of which are now listed as I-CSR standards, can foster organizational performance and improved results (Cavazotte and Corteze Chang 2016). CSR initiatives focussing on individual employees are likely to boost human capital through three mechanisms: (a) attracting more qualified workers; (b) on-going expansion of employee skills; and (c) retention and engagement of the workforce (ibid.).

Lee and Peccei (2007) found supporting evidence that through positive feedback, employees develop a greater sense of organization-based selfesteem that after metaanalysis of the predictors and consequences of organization-based self-esteem has a positive relationship with job performance (Bowling et al. 2010). CSR positively influences identification and job performance (Carmeli and co-authors 2007). They found (ibid.) that organizations with CSR practices that match the desired ethical work climate of their employees, give employees greater satisfaction, greater organizational commitment and diminished turnover intentions than individuals who did not share the same ethics with the organization.

CSR is closely related to organizational citizenship behavior (OCB). OCB is defined as behaviors that are discretionary and not explicitly rewarded; but they can help improve organizational functioning and effectiveness. One suggested that OCB is largely driven by fairness perceptions. The outcome of performance was mentioned; whether the perceived justice had any influence on the resultant performance. Just as there are good outcomes from fairness, bad outcomes can result from unfairness. The first would be that of job withdrawal, mainly behaviors or behavioral intentions such as absenteeism, turnover and neglect. Next, the perceived unfairness leads to various negative reactions, such as employee theft and organizational retaliatory behaviors (Ho 2012).

Researchers suggested that internal social responsibility initiatives can favor the company’s reputation and promote its positive image as an employer (Kim and Park 2011). This can be strategic for companies, since human capital acquisition risks pose threats to productivity, as well as turnover and replacement costs, particularly in industries facing tougher competition to hire professionals and specialized technical workers (Brymer et al. 2014). CSR also becomes more critical as new generations enter the market with inflated expectations regarding work-life balance, personal development programs and career growth opportunities (Deal et al. 2010). CSR can also impact the performance of workers more directly, by promoting higher efficiency through learning and development of new skills. Research evidenced a positive relationship between the number of employees who received training and the companies’ performance, especially in the services sector (Van de Wiele 2010).

Nowadays, providing on-going training for workers is no longer optional, but rather urgent, for company’s competitiveness. Investment in training and education can foster immediate, non-financial gains such as greater product quality and increased operational efficiency, which over time should positively impact company results (Cegarra-Navarro et al. 2016).

9.4 Discussion

The successful Slovenian and foreign companies are aware that they are interdependent with their employees, business partners, environment, communities and good governance. More and more of them are aware of the importance of CSR as a responsibility for their impact on society, which considers interdependence and demonstrates efforts for holism and balanced business in all organizational key areas and functions. Due to the new European and Slovenian legal obligation that companies in the public interest with more than 500 employees should report on non-financial aspects of business as early as 2017, CSR, covering also the attitude towards employees, is increasingly important. In Slovenia it significantly affects the companies’ reputation as employers and in relation to other stakeholders. Developing employees’ capabilities and balancing their individual work performance are closely linked, as training and the development of employees’ capabilities allow achieving the desired level of individual work performance and the desired organizational results (Aguinis et al. 2011). Multiple evidences show how greater attention to CSR and especially greater concern to develop strategic human resource practices contribute to the appearance of everyday improvements such as better work environment (Beauregard and Henry 2009), higher feeling of job satisfaction (Valentine and Fleischman 2008), higher affective organizational commitment (Farooq et al. 2014) and greater competitive advantage with direct impact on performance, either by reducing the dropout rate and absenteeism rates or increasing the employees’ productivity and therefore the their companies’ financial performance (Mishra and Suar 2010). Organizations’ commitment to CSR practices certainly has an emotional impact on the employees’ feelings toward their company, remodeling their motivation, performance and intention for long-term staying in the company (Bashir et al. 2012).

CSR practices, including focus on employee education and development, were associated with positive organizational outcomes such as performance (Agan et al. 2016; Ferraz and Gallardo-Vazquez 2016). Investment in CSR may also encourage competent employees to stay with the company, enabling the retention of knowledge, relevant to the business and reducing turnover costs (Cavazotte and Corteze Chang 2016). Research unveiled a positive relationship between CSR and employee performance either through the strengthening of the emotional ties and values, or through an increased sense of duty and obligation to their companies (Eisenberg et al. 2001).

Other studies showed that when employees believe that the company which they work for is committed to them, guaranteeing their rights as workers, protecting their health and safety and investing in their professional development, their emotional ties and desire to remain in this company are positively influenced (Jones 2010). Theoretical research strongly supported the proposition that companies that make more substantial investments in employees are more likely to attract, engage and retain human capital, and therefore improve their performance (Aguinis and Glavas 2012).

The success management, based on the development of employees’ capabilities, emphasizes continuous growth over a longer period of time, focusing on individuals’ advantages, developmental areas and development needs, which can be realized through selected methods of developing employees’ capabilities, thus influencing meeting organizational goals (Aguinis 2013). It is critical for most organizations that the development of employee capabilities through interpersonal methods of development leads to anticipated action and improvements (Aguinis et al. 2011). A long-term approach to the development of employees’ capabilities is crucial for achieving individual performance (Herb 2015). In order to effectively manage the desired growth of individuals, an interim evaluation (agile setting of goals) and on-line feedback (Aguinis 2013) should be established throughout the period of managing the performance and target orientation. The model of agile performance demands interpersonal methods to include development and establishment of development relations in the workplace. All of this is reflected in the optimal mutual relations, which positively influence the subjective emotional well-being, which we define as a positive evaluation of the individual’s life, including positive emotions, work, and contentment with life (Diener and Seligman 2004).

In recent years, however, the annual performance appraisal process is no longer sufficient. Assessing the employees’ performance, the result of which is a look back and not in the future, matches no longer the needs of employers who want to develop and promote better performance of their employees. Annual evaluation interviews, which can be called shortly the annual interviews, proved in practice to be too bureaucratic and complex; they often include evaluation of different performance factors (such as the extent and quality of work, knowledge, innovation, development, communication). The final performance assessment can be expressed by a number or rank (forced ranking). Often, in practice, systems of annual interviewing are simplified: managers can easily forward their forms to employees in advance, and then deliver the completed interview form, which they both sign. In practice, however, we found in many cases that there is often no personal interview at all, but the head and employee only sign the form; thus the annual interview is considered successfully completed. Probably no specific explanation is needed why one must radically change something in this area. The focus must be on the future and employees should not be passive objects in such interviews, but active individuals who can influence their development and realization of potentials. Managers must become coaches of their employees, directing employees’ behavior to help them to better realize their goals (Armstrong 2015). Annual interviews, which are carried out once a year from top to bottom, have become “the dishonest annual ritual” (Armstrong and Murlis 1994). Another problem with the annual interviews that must be exposed is that in the organization they are often treated as another requirement of the HRM service. Forms are fulfilled, but agreements are not implemented (Bazerman and Silverthorne 2009; Barry et al. 2013).

One must recognize that traditional systems of employee performance evaluation and management are simply not intended to improve the employees’ performance and development. These systems are designed to be based on an assessment of the employee’s past performance. Today’s work of individuals consists of several developmental target cycles, e.g. once a month or a week, while traditional procedures for achieving goals and reviewing performance still apply a 12-month cycle. The traditional performance appraisal process also does not consider the groups’ performance. Deloitte’s study (2015) showed that managers estimate employees’ performance once a year on average 28 hours. This is certainly far too much for an inefficient system.

When considering the future of traditional employee performance management systems, one must highlight the findings of neuroscience as these findings present an important milestone in thinking and explaining the failure of traditional employee performance management systems. With the help of the findings of neuroscience, one actually reduces the gap in employees’ knowledge, skills and behavior by helping humans understand how the brain influences human behavior (Swart et al. 2015). The findings of neuroscience show that people are most motivated and successful when they use their natural and favorite patterns of behavior and are also rewarded for this.

The concept of intrinsic motivation requires individuals’ intrinsic motivation, when feeling interest in an activity and perceiving the possibility of choosing the activity (Košir 2013). We must not, however, equate intrinsic motivation with internal control, since this means that one performs internally controlled behaviors because one feels inner pressure to achieving certain standards or outcomes, and such behavior rarely follows interest and perceived choice (ibid.).

If we transfer the concept of intrinsic motivation to the business environment, we could say that the development of employees, which is intrinsically motivated, is the one that leads to more lasting knowledge and better achievements and is more pleasant to the individual/employee. It is unrealistic to expect employees to be intrinsically motivated for all activities. In companies, often in performance management systems, the principle is used to use the bonus (bonus, higher salary) as key motivation for the greater performance, and a penalty (salary reduction, no involvement in training, etc.); hence, “the carrot and the stick” organizations often present environments that extensively promote extrinsic motivation. In order to improve the performance of organizational employees, one must develop and encourage employees with appropriate incentives and methods for trying to identify and realize the potentials and areas for which individual employees are intrinsically motivated. The key problem is the employees who are completely unmotivated (Herb 2015).

CSR can provide tools for capitalizing on many missed opportunities within HRM (Basil and Weber 2006). There is considerable empirical support for the argument that CSR motivates employees in their work in various ways. A respected survey (KPMG 2005) reinforces the argument that employee motivation belongs to the top business drivers of CSR. The major role of CSR is to foster the employee’s empowerment, which matters for better employee performance (The City of Edinburgh Council‚ the OneCity Trust 2005). In order to examine the details more deeply, we divide apparent motivation-related dimensions of CSR into McClelland’s three motivational causes: achievement, affiliation, and power. CSR develops an employee’s achievement-needs and hence motivates the employee to work. Achievement is related to an individual’s responsibility for matching expectations and pursuing efficiency. Various themes emerge in consideration of this area of thought: employees’ pursuit of pride, loyalty, fun and happiness, learning, and development.

Motivating employees to complete their job at a satisfactory or better level can be challenging. Employees show motivation when they are self-inspired to perform tasks and proud of their work. Employees with no drive to succeed in the company adversely impact others in the workplace, which can directly affect the organizational success. Dissatisfaction in the work environment, leading to lack of self-motivation may cause negative consequences. If there is no motivation, it can be difficult to complete a task. Low productivity is a consequence of poor motivation; other employees may feel that they must work harder to compensate for unfinished work. Encouragement helps employees to know how they are appreciated. Poorly performing employees can consume owner’s valuable time; dealing with late or unfinished projects can directly impact the earnings. When one employee lacks motivation, it can diminish the morale of the entire team. Dissatisfaction with their jobs can make employees quit. To avoid this scenario, motivating the employees brings changes in their behavior (Franco and Suguna 2017).

9.5 Conclusions

By performing employee-focused CSR, organizations are sending signals to their employees that they respect and care for them. With such positive feedback, employees can be expected to develop a greater sense of organization-based selfesteem (Ho 2012).

9.5.1 Theoretical Implications

Beyond the empirical contributions, we suggest three wider theoretical contributions arising from our research. First, our findings help to re-conceptualize the outcomes of CSR. Our findings support the mainstream literature view that CSR very likely positively impacts employee performance; they suggest that CSR’s impact on employee motivation emerges when organizations ‘evaluate’ the results of CSR performance. We expect the links between CSR, employee performance and employee motivation to be of growing importance for the theoretical discussion on CSR for the future and we hope this chapter contributes to this debate.

9.5.2 Managerial Implications

When organizations perform CSR activities, their employees perceived them as good and fair corporate citizens, which also enhance the employees’ self-esteem in the workplace. Therefore, it makes sense for organizations to invest in CSR practices, as CSR projects back a strong sense of fairness and boosts employee performance. Significant and positive relations between CSR and employee performance, include:

  • Employees in socially responsible firms exhibit better operating performance in terms of sales per employee and net income per employee; and

  • Socially responsible firms, on average, reward their employees with higher salaries.

A further interesting result of the study (Sun and Yu 2015) is that although socially responsible firms, on average, have higher employee cost (per employee) than peer firms, they experience better financial performance in terms of employee productivity.

CSR practices also enhance the organization’s reputation, thereby attracting prospective employees, while keeping the current employees happy. However, while investing in CSR practices is important, the key point is that employees should perceive the CSR acts. This perception cannot be rushed, and needs to be reinforced over time. Therefore, organizations should embed CSR practices into their operations.

Additionally, organizations are recommended to harmonize their CSR efforts with the activities that their employees find important, and to actively involve them into CSR practices. There are some examples of good practices in this area, but additional research should take place to substantiate them.

The principal consequences of CSR initiatives are organizational trust and organizational identification, which in sequence affect competitive performance (Farooq et al. 2014). Both, HRM and CSR have an inbuilt capacity to induce social exchange processes between the organization and its employees as CSR may influence employees’ commitment and behaviors through a social exchange process (Farooq et al. 2014).

Therefore employees’ perceptions of their companies’ CSR affect positively their loyalty to the organization, the disposition to work hard for the organization, the degree of goal settings and desire to remain with their organization, positively contributing performance toward its growth. CSR is also a bond between employees and their organization, supporting firms’ competitive performance.

Companies which facilitate transparent promotions and selection criteria and a successful and stable career plan to their employees, get in turn satisfactory job performance and consequently a higher competitive advantage. When employees realize that their employer is genuinely interested in their success and their way of performing, they feel much more encouraged to strive for high performance levels (Garg and Rani 2014). In this area the proper internal communication is unavoidable.

High-performing employees give organizations a competitive advantage because they are productive, enthusiastic and fully engaged in their responsibilities. Firms should nowadays be aware of the importance of taking care of professional careers of their employees and their wellbeing and balance between work and personal life since it will generate staff’s loyalty and practices that increase employees’ retention, development and engagement. Finally, it will result in increased productivity and better financial results of the organization.

9.5.3 Implications for Practice

In order to benefit the most from CSR practices and to obtain long-term positive effects on organization’s performance and competitiveness, organizations are recommended to plan, organize and execute CSR activities, closely interlinked with their employees. Employees should be involved in all phases of CSR, starting with deciding, which CSR practices are the most important and how the organization will implement them. CSR is the most powerful motivation, increasing the satisfaction and individual well-being and fostering innovation, hence boosting the operational performance in work processes.

9.5.4 Policy Implications

Successful organizations contribute more to the successful economy by benefiting the whole society. Therefore, policy makers should promote, support and disseminate good practices by providing legislative and social framework, which would accelerate implementation of best practices in as many organizations as possible.

9.5.5 Future Research

Our study’s limitations can be seen as fruitful avenues for future CSR and employee attitudes/behaviors research that could determine which dependent variables are linked with the perceived CSR, such as actual employee turnover, productivity or absenteeism. The research on the impact of CSR practices can also be extended to other stakeholders, as they too form an integral part of the organizational environment. Through this study, others can have a clearer understanding of the employees’ oriented CSR and be encouraged to delve into the CSR’s dynamics and benefits.