Role of Employee Engagement in Enhancing Performance

Evidence from Commercial Banks in Nepal

Abstract

Purpose: This study examines the impact of employee engagement on employee performance in commercial banks of Kathmandu Valley, emphasizing the mediating role of engagement. It investigates how key engagement factors, employee mobility, work environment, knowledge sharing, and training and development, affect engagement and subsequent performance.

Design/methodology/approach: Anchored in Social Exchange Theory (SET) and a positivist philosophy, the study employed an explanatory research design. Structured questionnaires were administered to 380 banking employees, and data were analyzed using descriptive statistics and Partial Least Squares Structural Equation Modeling (PLS-SEM) to explore both direct and indirect relationships among variables.

Findings: Results indicate that employee mobility, work environment, and knowledge sharing significantly enhance employee engagement, which, in turn, positively influences employee performance. Training and development showed no significant effect on engagement, signaling the need for more effective programs tailored to employees’ needs.

Implications: The findings provide practical guidance for banks, HR managers, and policymakers to strengthen engagement through strategic mobility, supportive work environments, and knowledge-sharing initiatives, ultimately improving performance outcomes.

Originality/value: This study extends SET to the Nepalese banking sector, highlighting the mediating role of engagement and offering empirical insights into how organizational factors drive performance in developing country contexts.

JEL Classification: J24, J28, M12, M54