Psychological Climate and Organizational

Effectiveness: Role of Work Engagement

Aakanksha Kataria*, Pooja Garg** and Renu Rastogi***

This study contributes to our understanding of the mediating mechanism of work

engagement through which psychological climate of an organization is linked with
the organizational effectiveness. We developed and tested a mediation model
associating between the latent constructs of organizational effectiveness. Our model
evaluates the premise that employees favorable perceptions of the organizational
settings are directed towards increased organizational effectiveness through an
individual-level construct, work engagement. Overall, data from 300 employees in
different service organizations in India support this model. Data analysis, performed
using Structural Equation Modeling (SEM) approach, revealed that work engagement
fully mediates the relationship between psychological climate and organizational
effectiveness, suggesting that employees engagement with their work plays a
significant role in shaping the effectiveness of their organization.

Introduction
A positive and supportive context is needed for human resources to achieve sustainable
growth and performance (Luthans and Avolio, 2003; and Luthans et al., 2008). In fact,
culminating effectiveness in the light of global economic fluctuations, and fierce
competition necessitates the espousal of positive perspective at workplace. A growing
body of literature on positive psychological climate suggests that the development of work
context designed to enhance employees motivational and affective reactions at work,
is profoundly associated with sustained organizational effectiveness.
Contemporary business organizations are facing many challenges to effectively
manage their human capital more than ever before. It is not easy to attract and retain
skilled and motivated employees as they have several other job options. Another major
difficulty in conquering this challenge is the expectations of the organizations from their
employees. Organizations require employees to be proactive, show initiative while
engaging with their role and remain committed to performing at high standards (Bakker

* Research Scholar, Department of Humanities and Social Sciences, Indian Institute of Technology, Roorkee
(IITR), Roorkee, India; and is the corresponding author. E-mail: aks2530@gmail.com
** Assistant Professor, Department of Humanities and Social Sciences, Indian Institute of Technology,
Roorkee (IITR), Roorkee, India. E-mail: gargpdhs@gmail.com
*** Professor, Department of Humanities and Social Sciences, Indian Institute of Technology, Roorkee (IITR),
Roorkee, India. E-mail: renurfhs@iitr.ernet.in

Psychological
2013 IUP. AllClimate and Organizational Effectiveness:
Rights Reserved. 33
Role of work Engagement
and Leiter, 2010; and Chughtai and Buckley, 2011). Cho and McLean (2009) also
suggested that it is not sufficient that they just show up; they need to be functioning
at the peak level of their potential.

However, it is a two-way process. Much effort is needed on the part of organizations

to help their employees thrive at the workplace. For instance, employees desire positive
feelings about their work experiences that go beyond global attitudes of job satisfaction
or commitment (Wagner and Harter, 2006). Hence, organizations need to manage not
only the physical and cognitive energies of employees at work but also the psychological
connection with their work and organization. In this connection, providing employees a
positive, fulfilling work environment conducive to their work-related wellbeing is of
significance where they can improvise and consequently help their organization to flourish
in the present scenario. To be more specific, psychological climate can have an important
influence on organizational effectiveness.
However, the relationship between psychological climate and organizational
effectiveness may not be straightforward, that is, to impact upon organizational
performance, positive climate perceptions must first lead to individual level outcomes. In
other words, though climate perceptions influence organizational effectiveness, this does
not necessarily imply that employees experiencing favorable organizational environments
will uniformly perform in ways to benefit the organization; individual differences are likely
to function as regulative aspect of workplace attitudes and behaviors, and influence the
extent to which they choose to augment organizational effectiveness. For instance, Brown
and Leigh (1996) observed that when employees perceive positive psychological climate
at workplace, they are more likely to be involved in their work and invest greater time,
effort and energy to achieve work goals. Garner and Hunter (2012) found that psychological
climate relates positively to employees work attitudes and their subsequent behavior in
organizations. Biswas and Varma (2007) also observed that employees climate
perceptions have significant impact upon employees citizenship behaviors and job
satisfaction and thus positively impact their job performances. Surprisingly, individual
attitudes and other temporary generalities of employee sentiments (such as organizational
commitment and job satisfaction) have recently been criticized for not providing an
inclusive view of an individuals self which encompasses a simultaneous activation of
personal energies at work (Alfes et al., 2012).

There has been a shift in emphasis within the organizational behavior literature, away
from contextual factors to individual attitudes and behaviors that might be critical for
organizational effectiveness, such as employee willingness and capability to invest their
positive energies at work and working in consonance with organizational objectives, such
as work engagement. Engaged employees are optimistic and spontaneous, they tend
to exhibit positive attitudes and proactive behaviors at workplace (Schaufeli et al.,
2002). In fact, the notion of engagement signifies more stable persistent and pervasive

34 The IUP Journal of Organizational Behavior, Vol. XII, No. 3, 2013

affective-cognitive state (Schaufeli et al., 2002), the prominence of which goes beyond
the temporary generalities of previously established constructs such as job satisfaction,
involvement and commitment (Wagner and Harter, 2006; and Shuck, 2010). Furthermore,
engaged employees are enthusiastic, proactive and happier at work, and if provided a
climate of psychological wellbeing, they are more likely to do things (such as, exhibiting
OCBs) that substantiate organizational effectiveness (Saks, 2006).
The aim of the current study is to examine whether the psychological climate has
an indirect impact on organizational effectiveness through work engagement. This
illustrates that the appraisal of organizational environments has important implications
for organizations and that psychological processes that accompany employee
perceptions of work climate can affect organizational effectiveness, that is, the effect of
psychological climate on organizational effectiveness might be due in part to work
engagement. Hence, our study seeks to uncover the joint psychological influence of
personal (i.e., work engagement)and contextual factors (i.e., psychological climate) on
organizational effectiveness. Within this context, as presented in the framework (Figure
1), we attempt to identify psychological climate as organizations attempt to facilitate
engagement at work which, in turn, drives organizational effectiveness.

Figure 1: The Conceptual Model Associating the Latent Constructs

of Organizational Effectiveness

n.s

Psychological Work Organizational

Climate Engagement Effectiveness

Theoretical Genesis
Psychological Climate
Though organizational climate research has long been substantiated in organizational
sciences for more than 50 years, employees psychological perceptions of their work
environments have received magnified attention in the management discourse of 21st
century. Psychological climate is an individual attribute (Hellriegel and Slocum, 1974),
measured in terms of how employees perceive and interpret their organizational
environments (Brown and Leigh, 1996), or the policies, practices and procedures which
are recognized and rewarded in the organization (Schneider, 1990). It is concerned with
the employees perceptions of virtually all aspects of their work environment (Parker
et al., 2003), and interpretation of them in relation to their wellbeing (Brown and Leigh,
1996). In specific, psychological climate refers to the perceptual and experiential
components of a reciprocal interaction between the organizational environment and the

Psychological Climate and Organizational Effectiveness: 35

Role of work Engagement
employee (Michela et al., 1995). This implies, when employees perceive their
organizational environments as meaningful, safe and resourceful, it serves as a favorable
condition to facilitate their wellbeing, which in turn determines the extent to which
employees drive their personal energies into their work role (Kahn, 1990). Based on Kahns
(1990) recommendations of positive workplaces, Brown and Leigh (1996) have identified
various factors of positive workplace climates that are emotionally fulfilling and supportive,
consisting of supportive management, role-clarity, room for self-expression, appropriate
levels of job challenge and ability to contribute to organizational success (Wollard and
Shuck, 2011). James et al. (1990) described a four-dimensional model of climate
perceptions incorporating (a) role stress and lack of harmony; (b) job challenge and
autonomy; (c) leadership facilitation and support; and (d) work-group cooperation,
friendliness and warmth. Furthermore, positive psychological climate has been found
positively associated with several work-related attitudes and behaviors such as job
involvement, satisfaction, commitment, efforts, employee performance, productivity and
OCBs (Brown and Leigh, 1996; Burke et al., 2002; Biswas and Varma, 2007).

Work Engagement
Engagement is one such higher order positive psychology construct which is concerned
with the employees experiences of work and organization that further determines the
extent to which they work in consonance with the organizations objectives. Schaufeli
et al. (2002) defined engagement as a positive, fulfilling, affective-motivational state of
wellbeing that is characterized by vigor, dedication and absorption. Vigor, a high level
of positive core affect, refers to the employees willingness to devote their time, effort,
and positive energy while performing job tasks. Dedication explicates the emotional
framework of engagement, in which employees experience their work as meaningful,
significant and challenging. Absorption is the cognitive aspect of engagement whereby
employees tend to be happily involved and experience their work as engrossing and
something to which they can devote their full concentration (Bakker et al., 2011).

Recent studies have posited engagement as the most influential business driver of
organizational success and performance. Engaged employees being enthusiastic,
dedicated and psychologically involved are better able to invest their active physical
strength and emotional energy towards the fulfillment of organizational goals. Although
previous researches suggest that engagement is related to workforce efficiency and
productivity, very little empirical research exists that explains the processes through which
engagement develops. Furthermore, due to its well-researched consequences,
organizations are seeking ways to embrace the concept, designing development plans,
and surveying their employees to explore what they need to take first (Wollard and Shuck,
2011). Saks (2006) has suggested that employees are likely to exchange their
engagement as a state of reciprocal interdependence for economic and socio-emotional
resources from their organization. This way, engagement has been recognized as a

36 The IUP Journal of Organizational Behavior, Vol. XII, No. 3, 2013

two-way relationship between employer and employee (Robinson et al., 2004). Thus, if
an organization is able to provide fair economic rewards, and a climate of mutual trust,
commitment, and participation, their employees tend to be engaged at high levels while
feeling obliged to respond in kind way. Wollard and Shuck (2011) have identified 21
organizational factors that aid in the development of employee engagement, most of them
revolve around enhancing the employees positive psychological experiences at
workplace, for instance, role clarity, job-fit, rewards, feedback, challenge, positive
workplace climate, etc. Several other studies have also reported a positive association
between positive organizational climate and increased engagement level of employees
(Hakanen et al., 2006; and Bakker and Demerouti, 2007). As discussed earlier, positive
psychological climate creates engagement-friendly psychological conditions whereby
individuals are more likely to invest greater efforts, time and energy in work roles (Brown
and Leigh 1996). In fact, engaged employees work harder and are more committed to
achieve task proficiency. Engagement of one person may transfer to others and indirectly
improve composite performance of teams (Bakker, 2011), which consequently helps
organizations to achieve its goals. In this connection, engagement has been recognized
as a key to organizational success and performance, and viewed as a vital element in
elevating organizational effectiveness (Cameron et al., 2011; and Welch, 2011).

Organizational Effectiveness
The underlying goal of most research on organizations is to improve their effectiveness
(Noruzi and Rahimi, 2010). The concept of organizational effectiveness has been the
central focus of researchers for more than 30 years (Cho, 2007). It has often been
described as the extent to which an organization is able to achieve its strategic and
operational goals. Organizational effectiveness is a companys long-term ability to achieve
consistently its strategic and operational goals (Fallon and Brinkerhoff, 1996, p. 14). Mott
(1972) defined organizational effectiveness as the ability of an organization to mobilize
its centers of power, for action, production and adaptation (p.17). In fact, effective
organizations tend to produce better quality products and are resilient in the face of
adversities. Three major aspectsproductivity, adaptability and efficiencyhave been
identified as primal to evaluate the organizational effectiveness (Mott, 1972), and found
to be most frequently used in various models pertaining to effectiveness (Steers, 1977;
Luthans et al., 1988; and Sharma and Samantara, 1995). Though a good deal of research
has shed light on the significant factors affecting organizational effectiveness, including
training climate and individual positive attitudes and behaviors such as commitment,
organizational citizenship behaviors, etc. (Organ, 1988; Podsakoff and Mackenzie, 1994;
and Gelade and Gilbert, 2003), yet there are less empirical evidences that support the
role of positive psychological climate and a nascent approach to work engagement in
augmenting organizational effectiveness. On the basis of the above discussion, this study
proposes the following hypotheses.

Psychological Climate and Organizational Effectiveness: 37

Role of work Engagement
 H1: Positive psychological climate will significantly and positively influence work
engagement.
H2: Work engagement will significantly and positively influence organizational
effectiveness.
H3: Work engagement will mediate the relationship between positive psychological
climate and organizational effectiveness.

Methodology
Participants and Procedures
The respondents in our study were executives/supervisory level employees nested within
different service organizations. Data were collected from 300 participants via mail or in-
person. Eighty one percent of our sample population was male and the average age of
the respondents was 34 years. Organizational tenure averaged 5.35 years and around
67% were educated at post graduation level (management and engineering backgrounds).

Measures
Psychological Climate: Psychological climate was measured using the Psychological
Climate Measure developed by Brown and Leigh (1996). The scale consists of six
subscales, namely, supportive management, role-clarity, contribution, recognition, self-
expression and challenge, and includes a total of 21-items (e.g., management makes
it perfectly clear how my job is to be done; doing my job well really makes a difference).
The reliability measure of this scale was 0.84.
Work Engagement: Work engagement was measured using the Utrecht Work
Engagement Scale (UWES-9) developed by Schaufeli et al. (2006). The scale consists
of 9-items and measures three sub-dimensions of engagement, namely, Vigor (e.g., At
my work, I feel bursting with energy), Dedication, (e.g., My job inspires me), Absorption
(e.g., I get carried away when I am working). All items relating to these three sub-
dimensions were measured on a seven-point scale ranging from 0 = Never to 6 = Always.
Cronbach alpha () for this scale was 0.87.
Organizational Effectiveness: An 8-item scale developed by Mott (1972) was used as
a measure of organizational effectiveness. The scale consists of 8 items, e.g., Thinking
now of the various things produced by the people you know in your division, how much
are they producing? Their production is, measured on a five-point scale ranging from
1 to 5. Each item needed a different adjective as its response, so the scaling of the items
was different. The Cronbachs alpha () was 0.81.

Data Analysis Technique

For the purpose of data analysis, the Statistical Package for Social Science version 17.0
(SPSS 17.0) and the Analysis of Moments Structure (AMOS 18.0) were used. The path

38 The IUP Journal of Organizational Behavior, Vol. XII, No. 3, 2013

analysis technique was used in this study to test the proposed model. Appropriateness
of the model has been assessed by applying the following indices:
a. The 2 testtests the difference between the predicted and observed

correlations, a nonsignificant 2 indicates a good model fit (Qian and Daniels,

2008). However, with regard to large sample base, 2 has its limitations in
rejecting the good-fitting models on the basis of poor evaluation (Giorgi, 2010).
Therefore, a number of other fit indices have been recommended to assess the
good-fit of the model (Giorgi, 2010);
b. The Comparative Fit Index (CFI), acceptable value 0.95;
c. The Normed Fit Index (NFI), acceptable value 0.95; and
d. The Root Mean Square Error of Approximation (RMSEA), a value less than 0.08
is deemed as a good fit (Wijhe et al., 2011).

Results
Table 1 presents the mean, standard deviation, inter-item correlation and reliability indices
for the key variables. As evident from Table 1, the key variables were significantly
correlated: psychological climate and work engagement (r = 0.53, p < 0.01); psychological
climate and organizational effectiveness (r = 0.41, p < 0.01); work engagement and
organizational effectiveness (r = 0.47, p < 0.01). Besides, the standardized regression
estimates (denoted by ) presented in Table 2 explicate a positive and significant
association between the study variables.

Table 1: Descriptive Statistics, Correlations and Reliability Indices

of the Key Variables
Variables Mean SD 1 2 3
Psychological Climate 4.07 0.63 (0.87)
Work Engagement 4.20 0.54 0.53** (0.84)
Organizational Effectiveness 5.47 0.57 0.41** 0.47** (0.81)
Note: **correlation is significant at 0.01 level, reliability coefficients are presented in parentheses on
the diagonal.

Table 2: Regression Estimates

Unstandardized
Coefficients Standardized
Coefficients CR Remarks
Standard

Error

Psychological climate 0.86 0.11 0.79 8.02 H1 accepted

Work Engagement

Psychological Climate and Organizational Effectiveness: 39

Role of work Engagement
 Table 2 (Cont.)
Unstandardized
Coefficients Standardized
Coefficients CR Remarks
Standard

Error

Work engagement 0.54 0.09 0.48 7.51 H2 accepted

Organizational
Effectiveness

To test the mediation of employee engagement between the relationship of

psychological climate and organizational effectiveness, the procedures of Baron and
Kenny (1986) were followed.

Figure 2: Standardized Regression Coefficients

Psychological 0.79** Work 0.48** Organizational

Climate Engagement Effectiveness

Note: **p = 0.01

Accordingly, with the aim of placing engagement as the mediator variable, the following
two conditions were set: (a) whether the direct path from psychological climate to
organizational effectiveness was greater than the path under the condition of mediation
(M1); and (b) whether the direct path from the predictors, i. e., psychological climate
and work engagement, to the criterion variable under the mediated condition was
significant (M2). Since condition (a) was negative and condition (b) was positive, the
results (see Table 3) showed that work engagement is a full mediator between the
relationship of psychological climate and organizational effectiveness. When we loaded
work engagement into the relationship model of psychological climate and organizational
effectiveness, the original relationship between these variables disappeared. Therefore,
work engagement has been found to be significantly mediating the relationship between
the predictor variable and criterion variable.
Psychological climate was significantly and positively related to organizational
effectiveness ( = 0.38, p < 0.01), specifying the mediated path of work engagement in M2
reduced this relationship to = 0.11, p > 0.05. Thus, results provide full support for H4.

Table 3: Fit Indices of the Proposed Model

2
Fit Indices 2 df df p GFI AGFI RMSEA NFI CFI

Proposed 102 52 1.96 0.14 0.995 0.972 0.06 0.996 0.998

Model (M2)
Independence 379 51 7.43 0.00 0.605 0.395 0.49 0.520 0.523
Model (M1)

40 The IUP Journal of Organizational Behavior, Vol. XII, No. 3, 2013

Discussion
Theoretical and Managerial Implications
The study makes multiple contributions to both theory and practice. The study tested
a conceptual model that links psychological climate in IT domain to employee wellbeing
and organizational effectiveness. Although a few studies have investigated relationships
between climate, employee attitudes, and behaviors and organizational effectiveness
(Gelade and Gilbert, 2003; and Martin et al., 2005), these studies have happened in the
western context and a careful and detailed identification of work engagement in the IT
context has been surprisingly absent from consideration.

The study explored the role of psychological climate as an engagement enhancing

strategy directed towards efficaciously culminating organizational effectiveness. The
findings suggest that the safe and meaningful working environments (supportive
management, role-clarity, self-expression, job challenge, recognition, and contribution) are
positively related to work engagement, which in turn is positively related to organizational
effectiveness. Organizational environments, which consist of the above-mentioned climate
considerations, are more likely to enhance organizational effectiveness, because of
employees experience higher work engagement. This list of positive climate aspects can
be of immense help to practitioners who often struggle with the task of identifying
workplace factors that can ensure employees favorable climate perceptions. These
factors can be incorporated into strategic HRM interventions of organizations. Formulation
of HRM interventions around these factors will lead to a better return on investment on
human capital management for the IT organizations and will make the HRM interventions
more effective for managers and employees in general.
The findings show that work engagement fully mediates the relationship between
psychological climate and organizational effectiveness in the IT context, suggesting that
employees engagement with their work play a significant role in shaping the effectiveness
of their organization. Engaged employees, through their positive psychological
experiences and positive attitudes, could further enhance the psychological climate of
an organization (Wollard and Shuck, 2011), and thereby contribute to the effective
functioning of organization. Specifically, engaged employees often experience positive
emotions (Bindl and Parker, 2010; and Bakker et al., 2011), which lead to the positive
activities in organizations like helping behavior, and create an upward spiral of positive
feelings (Cameron et al., 2003). The positive gain spiral of constructive emotions increases
employees pride in organization, enjoyment of the work, and satisfaction with the job
which are indispensable ingredients to the managerial success and organizational
excellence (Fineman, 1996; and Cameron et al., 2003). The findings of the study provide
support to the extant literature that has shown the value of engaged workforce in impacting
variables such as financial profit (Harter et al., 2003), managerial effectiveness (Luthans
and Peterson, 2001) and greater business unit performance (Harter et al., 2002).

Psychological Climate and Organizational Effectiveness: 41

Role of work Engagement
Conclusion
The management of IT professionals has increasingly become important in the face of
vying contemporary realities of business environment, as organizations constantly seek
to augment their emotional attachment with work and achieve organizational effectiveness.
The study emphasized significant climate factors that may impact organizational
effectiveness and explores the mediating role of work engagement for psychological
climate and organizational effectiveness in the IT context. This study yields some relatively
specific suggestions for human resource managers whose job involves maximizing
workplace efficiency for enhanced organizational effectiveness.

Limitations and Future Studies

The study carries certain limitations that can be addressed in future research. First, the
cross-sectional design of the study does not allow for the causal inferences to be made.
Future studies should test the relationship between psychological climate and
organizational effectiveness through other study designs, like experiments and
longitudinal studies. Secondly, data are based on self-reports; it is likely that the method
variance inflated the relationship among the study variables.
An important measure of future research is to evaluate organizational effectiveness
with more objective data, in addition to the subjective measures. The measure of
organizational effectiveness captures employees perceptions of effectiveness in terms
of productivity, adaptability and flexibility of their firm, and thus does not provide a concrete
and objective assessment. Additionally, other indicators of organizational effectiveness
like profitability, output and managerial effectiveness can be included in further studies
to maximize the scope of measurement of the variable.

Acknowledgment: The funding agency for this study was the University Grants Commission
which provided a grant in the form of Junior Research Fellowship to pursue a full-time Ph.D.
from the Indian Institute of Technology, Roorkee. However, the implications, conclusions and
recommendations are those of the authors and do not necessarily represent those of the
funding body.

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46 The IUP Journal of Organizational Behavior, Vol. XII, No. 3, 2013

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