Research from the past decade shows a distinct correlation between employee satisfaction and company profitability, notably in a 2008 study that appeared in the Journal of Operations Management. The Hong Kong-based researchers concluded that “employee satisfaction plays a significant role in enhancing the operational performance of organizations in the high-contact service sector.”
The link between employee satisfaction and company profits holds true even when employees have no direct contact with customers, a 2004 Purdue University study found. The study’s head researcher, James Oakley, then an assistant professor of marketing in the Krannert School of Management, concluded that employee satisfaction across the board “is a key attribute of the engaged employee who embodies a high degree of motivation and sense of inspiration, personal involvement and supportiveness.”
A company’s reputation for how it treats employees is all the more visible now in the age of the Internet. News spreads faster, and former and current employees are able to share anonymous reviews of their workplaces online. That puts the pressure on. As USA Today reported last year, reputation can significantly impact company worth and customer engagement.
“There’s fairly solid evidence that companies that treat employees well see their stocks prosper,” writes John Waggoner. Still, he adds, “some companies that aren’t noted as great workplaces can see their stock prices rise, too.”
But karma does eventually come around. Investing in employee satisfaction is a longterm investment, so the fallout from failing to do so can take a while to reveal itself.
“Those that habitually treat employees badly often do suffer for it — and for a long time,” Waggoner says. He quotes Linda-Eling Lee, an executive director at investment analysis firm MSCI:
“Companies that have a poor reputation see a bit of a lag. And I do think that companies that lag — it’s amazing that they chronically underperform. They lurch from crisis to crisis.”
Beyond company reputation and the profits-linked positive attributes shared by satisfied employees (creativity, commitment, motivation, etc.), there are the day-to-day benefits of keeping employees happy, from retention to hours worked.
A 2006 survey conducted by MONEY Magazine and Salary.com found a big gap between satisfied and unsatisfied workers in terms of weekly hours.
“Extremely satisfied employees are putting in a lot more time at work than others,” CNNMoney’s Rob Kelley wrote in a summary of the study’s findings. The most satisfied reported an average of 56 hours a week — 11 hours more than the least satisfied group, and “almost without exception, as satisfaction rose, workers reported putting in longer hours.”
Companies are often daunted by the prospect of keeping employees happy during lean times, but investment in employee satisfaction needn’t be costly. Often the smallest gestures of gratitude and engagement add up the most.
As Julie Gebauer, managing director for talent and rewards at Towers Watson, told USA Today’s Waggoner, “What makes the biggest impact are things that don’t have significant costs. How expensive is it for a senior leader to give an employee a pat on the back, or give someone the opportunity to work from home for a day or two?”
Investment in employee satisfaction is one of the smartest longterm investments a company can make. Satisfied employees are more likely to stay, work hard and be committed to the company mission.
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