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Critical evaluation of impact of stress on employee performance and productivity

| August 18, 2016


Today businesses are more focused on quicker and cheaper ways of achieving output than on any other business aspect (Hammer & Hershman, 2010). This is one of the leading causes of stress in the workplace.  Health and Safety Executive (2006) outlines six substantive factors as potential causes of  stress at work. Working conditions that include; temperatures, lighting, unsociable hours, and workload among other conditions are classified under demand. The independence from control of how one does their work is also a stress factor categorized under control. Relationships with the management or superiors subordinates, as well as colleagues, are also a stress factor (Dowell, 2001).  The way in which the management introduces, manages and communicates change is another key stressor. In addition, clear understanding or roles at work is important as luck of this is detrimental as a stressor, and support is most vital; support can take the form of training , encouragement, sponsorship and luck of it is also a stressor (Fink, 1986).  Work related stress has become the focus of a body or research and specifically on its impact on employee performance and productivity, the cost high in both financial and socio-economic terms (Health and Safety Executive, 2006).  Researchers lay emphasis on the employee performance and productivity as the results of work related stress; however, this is a fallacy as stress is ubiquitous (Vajda, 2012), and should, be an important factor in management with managers as stress moderators (Shanks, 2011).

Stress on Employee Performance and Productivity

As research shows, there is a relationship between stress and organization effectiveness.  Stress at work is a result of incompatibility or mismatch between demands at work and one’s mental moderation process, which includes the way information, is processed, planned and implemented (Health and Safety Executive, 2006). Workplace stress is detrimental to employee health and work and is a major source of psychosocial illnesses (Schumpeter, 2010). Stress has adverse effects on employees and stress management is necessary to minimize organizational failures. However, stress is not the only factor that causes organizational ineffectiveness; stress is an occupational Health and Safety issue that can be remedied with good management practices (Dowell, 2001; Health Safety and Environment , 2013). Stress is not the real cause of organization ineffectiveness, but rather a result of loop holes in the management process.  Instead of isolating stress as a single independent factor in organizational ineffectiveness, ineffective management skills need to bear the brunt share of responsibility.  

Learning and Knowledge Management

Organizational effectiveness is a key factor in strategic management, and this is the main point of focus for every business stakeholder. However, this tends to make businesses look at projects in the short term in lieu of looking beyond the traditional neglected and non-integrated methods of learning and knowledge management. The culture predicated on learning and knowledge management approach is beneficial to businesses in tackling the stress issue and refocusing their efforts on organizational effectiveness (Gold et al., 2001). The impact of stress on employee performance and productivity is a notion that is misplaced as stress is a symptom of challenges in management and not the real cause of low performance or productivity (Vajda, 2012). In today’s business world, managers seem to fall in the pit of conflicting priorities with differing objectives each with a unique way of performing work (Beer & Eisenstats, 2000). This is detrimental to sharing of knowledge, which is important to the successful management of any business. Lack of quality direction contributes significantly to disunity in organizations and gives rise to situations of conflict (Beer & Eisenstats, 2000, p.32). Crucial to the success of any organization is learning and knowledge management. Information as a source of knowledge is vital in any economy and knowledge can give businesses the much sort after competitive advantage. Effective knowledge management, as Gold et al. (2001) explain, is the implementation of infrastructure that consist of technology, structure and culture in combination with the knowledge process design of the collection, transformation, application and protection. Effective and efficient knowledge management is more likely to aid most companies in enhancing organizational performance than research on stress as a limiting factor. As a component of knowledge management, knowledge sharing is a conduit through which effective integration between employees can be achieved. This integration is critical in reducing conflict and an important a stress mediator. Effective knowledge sharing can be analyzed through the employees and transfer of knowledge as well as mechanisms in place. Ingirige and Betts (2003), assert that most businesses fail to grasp the importance of sharing information between employees a fact that has been reiterated by Darroch (2005), who points at the fact that knowledge management is commonly taken for granted, but is an important antecedent of businesses performance or innovation. It is important for businesses to focus on the implementation of knowledge management, to improve on their effectiveness. Knowledge management antecedents critical to the effectiveness of business are organizational culture and organizational learning (Darroch, 2005). With the implementation of these measures, it is less likely that stress will any longer feature in any aspect of organizational effectiveness. Knowledge management and organizational learning are effective stress managers that are the foundations of ideal management processes (Sommerville et al., 2004).

Organizational culture determines an employee’s expectations be it formal or informal.  It is what describes the kind of individuals most likely to fit a company, and what influences employees way of communication both in and out of the organization. Organization culture is significant in shaping the way employees work within an organization. It is imperative for an organization to create a culture of honesty, faith, independents, and satisfaction (McGuire et al., 2009).  Organizational culture is the conduit through which employees enhance their knowledge and satisfaction that breeds businesses effectiveness. Rai (2011), presents a significant connection between organizational culture and knowledge management. In addition, organization culture facilitates organizational learning, an important component in employee motivation. Organizational learning is an important business process through which knowledge is built and existing knowledge is rebuilt. An organization with a culture inclined to learning, provides an enabling environment of knowledge creation and sharing making them more competitive in a dynamic environment (Fong, 2003). Organizations are more likely to benefit in organizational effectiveness when focused on learning behaviors.  Organizational culture can positively impact the execution of a knowledge sharing strategy, organizations that uphold trust and co-operation, are potential beneficiaries of a tacit sharing environment. The design of organizational learning should connect knowledge sharing to the benefits of the concern parties and this is best achieved by taking advantage of the organization culture. Fong (2003) is of the opinion that a common culture in Japan has made its industries innovative as a result of the high level of socialization such as sharing tacit knowledge. With a favourable organizational culture that supports effective managerial skills (Sommerville et al., 2004), stress is unlikely to prevail, an indication that stress moderators are in built in good managerial process.

It is clear that stress should not be the culprit in organizational effectiveness; it should be as mentioned above, an indicator of loopholes in the management process. In some jurisdictions, it is the management’s responsibility to adequately address employee stress at work failure to which legal action could be taken under the Health and Safety in Employment Act   (New Zealand Government, 2009 ; Health Safety and Environment , 2013).  It is misleading to focus on stress as a factor in organizational effectiveness rather than as a health and safety issue. Stress is increasingly becoming a challenge in management because of the failure to fully perceive it as common issue in today’s world and organizations need to develop strategies on how to deal with employee stress. As a matter of fact, it is imperative that organizations are run effectively to avoid the increased occurrence of work stress.  Knowledge management is a Stress Mediator making it a valuable management tool in this regard. As Fong (2003) alludes, knowledge management through sharing promotes team building an important aspect of innovation. Stress in any business environment has the potential for claims that is detrimental to the individual, the organization, and ultimately the reputation of the industry. With a suitable and appropriate design, knowledge within the organization can be collected and shared in a manner most likely to mitigate stress inducers. Sommerville et al. (2004) explains that knowledge management is a broad term, to realize its potential; there is a need for a detailed analysis of its different facets. Among them, knowledge sharing is revealed as a potential cause of competitive advantage as well as a stress mediator. It is important to demystify the notion that stress is an independent factor in the production equation. Instead, focus need to be shifted to the treatment of people within the organization in regard to focusing on how the individuals within the organization are treated in terms of knowledge generation and sharing will aid the organization in its efforts to reduce workplace stress.

Organizational Performance and Development through People

Human resource is a major aspect of organizational performance and development, and this must be a focal point for every organization. It is no wonder that most organizations continually invest in people, in the today’s soft economy, so that they could have a competitive edge; have a loyal customer base, as well as a motivated work force (Cascio & Boudreau, 2010 ). Business strategies involving the implementation of organizational development approaches are most likely to enhance performance of an organization, and most important tackle work related stress among employees. As noted in the above paragraphs, stress has been focused on as a major cause of low performance. This fallacy has been the cause of unnecessary attention on symptoms of the real issue. In the current world, investment in people has often helped most organizations achieve better performance, because investing in people often develops and retains highly skilled employees while holding them accountable to ensure business success (IBM Business Consulting Services, 2005). There are organizations in this century that are still filled with individuals who are in the wrong jobs or those whose talents are not fully tapped in their current jobs(Wheeler et al., 2007).  Any management has an opportunity, through investing in people,to focus on improving their employees’ talents and tap them in ways that are beneficial to everyone in the organization.In the same line, investing in people encourage them to be creative, innovative, and support their efforts. The same logic is applicable to other resources: most organizations can discover its hidden resources, as well as those that are underutilized. On the contrary, lack of quality investments contributes significantly to disunity in organizations and gives rise to situations of conflict (Wheeler et al., 2007). Organizations that do not employ or implement appropriate investment in its human resource suffer great losses(Kreisman, 2002).

Crucial to the success of any organization is a positive interaction between enterprise strategy and employee rewards. For most organizations, people performance management entails the redirection of resources to focus on the important aspects of the business such as motivating employees to enhance performance and organizational development. In these organizations, organizational performance and development is undertaken in more ways than one to improve organizational effectiveness. Organizational development antecedents vital to the effectiveness of business are good leadership, training, rewards, alignment and communication, which are anti dotes to stress.

Good leadership and ability to motivate employees is a determinant in an effective human resource management in an organization. Good leadership is the determining factor in regard to people’s expectations whether formal or non-formal. Sanhueza(2011), posit that organizations that have leadership programs and incorporate them in their strategic plan are most likely to avoid leadership challenges that the organizations are likely to face in the future. There is not only a positive correlation between good leadership and organizational performance, but also with reduced workplace stress(Lopez et al., 2011). Leadership ensures the retention and selection of persons suitable for the company, and influence customers and other stakeholders. An organization can create leadership development programs in response to significant challenges, such as stress, other than leaving it to chance. It is imperative for an organization to create a culture of good leadership to foster honesty, satisfaction and performance. Good leadership and motivation encourages organizational performance, an important aspect in any organization. According to Wirtenberg, et al. (2007), leadership is the passion and management the system that drives an organization to achieve the required performance (Wirtenberg, et al., 2007). Quality leadership entails developing a smart vision for the company, listening to customers, employees and other stakeholders, providing beneficial feedbacks, rewarding employees for their achievements and prioritizing customers’ needs. In addition, business leaders are supposed to nurture their employees, inspire and lead by examples. In this way, the company’s employees can adapt their habits to increase their individual performance. The major aspect of leadership that requires improvement is the need for leaders to understand the benefits of people to the development of their organization, and know that like any manager they should motivate and encourage all stakeholders in the organization in order to enhance organizational effectiveness.

Employee training as a component of organizational development is an important business process through which knowledge is built, and existing knowledge is rebuilt. An organization with a culture of training provides an enabling environment of knowledge creation and sharing making it more competitive in a dynamic market environment (Fong, 2003). Training is necessary for supporting the organization’s alignment process, as well as, equipping employees with knowledge required when dealing with customers. The training includes customer service management aspects, improving services, and streamlining operations to reduce business costs (Bradford & Burke, 2005). Necessary adjustments in training programs for organizations should include training of customers. This entails guiding them to be good clients by raising awareness of the products and providing them with useful information about the organization. Organizations are likely to benefit from training since training influences the execution of most business processes and co-operation to encourage business success as well as limiting workplace stress.

Rewards and recognition are significant in shaping the way employees work within an organization. These are the conduit through which employees enhance their knowledge and satisfaction that breeds businesses performance and development. Besides, recognition and rewards facilitate organizational performance and development, which are vital aspects of improving organizational values and full utilization of resources. Recognition of employees and incentives encourage loyalty, commitment and foster participation in communication. Organizations with reward systems for their top-performing employees encourage productivity and development of business activities. Recognition of employees entails giving feedback on their performance, rewarding their achievements either formally or informally (Wirtenberg, et al., 2007). Rewards may be a trip to a company event, merchandise price of cash bonus; these reinforce positive behavior and eradicates workplace stress since workers tend to repeat behaviors they are rewarded for. Improvements essential to rewards include structured customer promotions which thank customers thus building their loyalty over time via continual recognition.

Organizational alignment and communication encourages the flow of business processes, which fosters organizational performance and development. In any organizational setting, communication begins with the establishment of vertical alignment, which entails moving the organization’s strategy through the company while turning objectives into actual work. Business alignment relies on continual communication within the organization which entails face-to-face contacts with all employees, regular meetings and internet. A clear understanding of the organizations’ workflow helps employees perform effectively since they are aware how their performance affects company success and consumer satisfaction (Rausch, et al., 2013). Communication helps employees understand their performances and understand the course of their actions to ensure that their work remains organized and jointly reinforcing completely eradication workplace stress.

Success and Failure of Organizational Activities

Organizations increasingly struggle to achieve competitive advantage and the success or failure of such achievement is dependent on business implementation. Center for Creative Leadership and Vangent(2007), explain that human capital is the most important component of business implementation. This is also evident in the fact that most researchers relate employees mental well being to organizational effectiveness.   It is critical for organizations take full advantage of their human capital investments by incorporating it in their strategic plan for effective management of employee talent base. Success and failure of organizational activities can be as a result of radical shifts in the business’ external as well as internal environment(Scott, 1992). Consistent with this paper’s argument is the fact that failure in organizational activities connected to the effectiveness of the management team.  There are several challenges in management that can lead to either success or failure of organizational activities.  It is possible for the management to be composed of people who are homogeneous or heterogeneous in ideas and style of leadership. In situations requiring decision-making during turbulent times, heterogeneous groups are efficient than homogenous groups. Fink (1986) outlines that, in situations requiring fast decision-making in a catastrophic event, homogenous groups are effective. Besides, long serving and homogenous teams are unable to diagnose the causes of failure in escalating situations effectively (Fink, 1986).  For example, a homogenous management team may cut costs by increasing employee work load as a measure to increase production. Such wrong decisions can amplify the existing problem leading to complete failure of the business; these are some known cause of stress in the workplace (Schumpeter, 2010; Health and Safety Executive, 2006). Long-tenured managers often perceive business failures to come from external and temporary issues while ignoring internal factors responsible for the failure, such as employee working conditions. Long serving managers are rigid to change, slow at decision-making and entrenchment, and spend more time identifying threats facing the organization (Geroski, 2001). Managerial succession improves organizational performance and survival rates. For example managerial succession in most organizations reduces conflict, increase business financial returns, and growth rates in situations whereby the successor is an outsider. Nonetheless, Miller (1990) asserts that success often results in over-confidence and arrogance among most organizations. Arrogance prevents firms from making small changes in their operations which leads to failure (Miller, 1990). In addition, successful organizations in reaction to external competitive pressures result to conservatism or even arrogant attitude. This is consistent with the common phrase in the business circles “success breeds failure and failure brings further failure in a spiral of business decay”(Ranft & O’Neill, 2001, p. 126). Besides, most businesses have the tendency to develop successful routines which grows into habits and routines ultimately become traditions thus preserving the company’s way of conducting business. As a result of redundancy in business processes, companies that were previously successful become unable to prevent their own downfall in the future. This is partly due to their inability to adopt a new and better method of business operations, such as implementation of knowledge management; this mitigates all other factors that could impede performance such as workplace stress.

Moreover, success of organizational activities is often attributed to skills and training of managers, internal work environment, and psychological traits of employees. This part of the study focuses on managerial skills, training, and external environmental situations that encourage business success. As indicated in the below paragraphs, these two issues are essential because they are often influenced by policymakers in the organization(Henry & Evans, 2008).According to a study by Levin-Epstein (2002), the most essential factor contributing success is good managerial skills coupled with financing, and personal traits. In this study, a manager with poor managerial skills is callous to the employees and makes the workplace environment unsuitable for most workers. This stresses some employees to the extent that their workplace productivity reduces. However, well-behaved and welcoming managers increase the employees’ morale thus increasing productivity which translates to business success. Besides, understanding the needs of the employees and customers increases the workers’ job satisfaction which increases productivity and ultimate success (Wheeler et al., 2007). Hard work is also an essential factor contributing to business success though the recommended eight hours may lead to improved satisfaction among employees. Such situations increase employees’ productivity and performance resulting in business activities success. Internal work environment and psychological traits of employees are the other factors that determine business success or failure. Most psychological studies indicate that high-esteem among employees regarding their roles in the organization reduces stress thus making them committed to the company (Dowell, 2001). In such scenarios, their productivity and performance increases contributing to business success, and failure in the contrary. Besides, self-competence and commitment increases business success; self-concept are ideas a person has about themselves based on their interactions with others. Based on this, if a person has a positive self-concept, they will act in a positive manner to increase their productivity and success of organizational activities. Employees who have high self-concept often believe in their abilities to accomplish any duty which makes them successful in most business errands; this increases performance, as well as, business success and most important creates a zero stress environment.


Stress is a symptom of a much complicated management challenges; it is not the problem as many researchers claim. Despite the fact that stress has a negative impact on employee performance and productivity, it is more important that organizations incorporate learning, knowledge management, and effective people management in strategic planning that support organizational effectiveness, as well as understanding the causes of success and failure in organizational activities. This would help demystify the common fallacy that stress is king in organizational effectiveness. Nonetheless, as indicated in the preceding paragraphs, stress has adverse effects on employees and stress management is necessary to minimize organizational failures. However, it is not the only factor that causes reduced workplace productivity and performance. Individuals in an organization must be able to share important knowledge through a well guided and effective organizational culture. This is a great motivator as well as a stress moderator. In addition, an organization must have in place good managerial structures that positively impact individuals in the organization. Human capital has been seen as vital in business implementation, a factor that has led many to focus on stress and its effects on organizational performance instead of management as a moderator of such a condition. Moreover, failure and success depends on factors such as the composition of the management, environmental changes, skills and training of managers, internal work environment among others. To alleviate organizational problems, methods such as social support, better workplace conditions, and self-perception among others are necessary to mitigate workplace failures. Additionally, engaging in interesting and complex tasks combined with flexible work procedures reduce failure rates which increases their productivity, but intra-department competition and poor interactions may alleviate the problems. Despite the numerous consequences associated with workplace issues, most organizations are reluctant to deal with the problems. It is critical for organizations to focus on internal management factors as key to alleviating issues such as stress instead of struggling to gain a competitive edge while shifting the blame to employees’ mental abilities in the name of stress. 


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