Despite the important role of employee engagement, research on the psychological factors affecting employee engagement is scarce. Furthermore, engagement research has focused on frontline employees, overlooking management employees. This study tested a conceptual model of the interrelationships among service climate, psychological capital, employee engagement, and turnover intention and explored the mediating effects of employee engagement. Structural equation modeling was used to examine the hypothesized relationships and an invariance test was employed to determine the effect of organizational hierarchy with a sample of hospitality frontline and management employees. Psychological capital and service climate were critical to elevating employee engagement and showed a stronger impact for managers’ engagement than frontline employees’ engagement. Furthermore, employee engagement was a critical mediator. The study fills important gaps in the hospitality literature and extends social exchange theory by showing reciprocal relationship differences between frontline employees and managers through an examination of organizational hierarchy.

Introduction

Employee engagement is a key component affecting employee performance and organizational financial success (Rothbard and Patil, 2011). Employee engagement is “a positive work-related psychological state characterized by a genuine willingness to contribute to organizational success” (Albrecht, 2010, p. 5). According to a recent Gallup report (2017), only 31% of service employees in the US is engaged in their work. Furthermore, the service occupation has the second lowest level of employee engagement, surpassed only by manufacturing. The report also reveals different levels of engagement by organizational hierarchy. In general, varying degrees of work engagement create a performance gap that costs US businesses up to $550 B a year in lost productivity (Gallup, 2013). Indeed, a focal problem in the hospitality industry is that service-oriented and labor-intensive work depends on employee engagement. Engaged employees perform better than disengaged employees via more positive emotions, better health, and heightened resourcefulness while also stimulating the performance of others in the workplace (Bakker and Oerlemans, 2011). Many studies in hospitality have focused on how employee engagement affects employee outcomes such as organizational commitment (e.g., Paek et al., 2015), job performance (e.g., Karatepe and Ngeche, 2012), job satisfaction (e.g., Park and Gursoy, 2012), and extra-role customer service (e.g., Karatepe, 2013a) rather than what factors influence the level of engagement. However, the work environment fosters employee engagement (Macey et al., 2009) and may lead to several behavioral outcomes depending on the context (Rothbard and Patil, 2011). Service climate as a work environment has been studied in hospitality and refers to “employee perceptions of the practices, procedures and behaviors that get rewarded, supported, and expected with regards to customer service and customer service quality” (Schneider et al., 1998, p. 151). When employees recognize that their work is supported and rewarded, they feel obligated to meet performance expectations, elevating their level of engagement based on a psychological contract with the organization (Macey et al., 2009). Furthermore, engaged employees are more likely to have positive perceptions of their work experience, translating to positive attitudes (Saks, 2006). Along with creating an optimal service climate for employees, it is also vital to understand how positive attributes such as psychological capital (PsyCap) elevate their level of engagement. Individuals tend to flourish when positive factors are given greater emphasis (Cameron and Spreitzer, 2011). PsyCap constitutes an individual’s positive psychological state of development (Luthans et al., 2007) and is a critical predictor for understanding the varying degrees of employee engagement (Karatepe and Karadas, 2015).