The Impact Of Employee Satisfaction On Business Outcomes

Introduction

Let me tell you a little story. Randy, who works for Gunderson as an equipment designer, is an unhappy employee. He has worked for Gunderson for 16 years, first starting out as a AutoCAD designer, drawing freight trains for manufacturing, and moving into an equipment designer position, designing braking systems for freight trains. He has been unhappy in his job for the whole time because of the divide that he feels with his boss. He doesn't have a university degree, and his boss respects him less than the people who have an engineering degree, even though he has studied all of the theory related to braking systems, and is among the best AutoCAD users in his group. Because he feels that his boss respects anyone who has a university degree more than him, he feels unhappy that he doesn't get more recognition in his job.

Unfortunately, this story is all too common, because studies have shown that an estimated 22 million workers are presently "actively disengaged", or extremely negative in their workplace. This costs the economy up to $300 billion dollars a year in productivity ("New Book" 1). This paper shows the linkages between employee satisfaction and customer satisfaction and retention and business outcomes, and demonstrates how employee attitudes can be measured and improved upon.

Part A describes linkage research, and presents evidence about how employee satisfaction correlates with customer service, market share, revenue generation, and the bottom line. Part B outlines methods to measure employee attitudes such as the use of employee surveys, and how to put measures into place to improve employee satisfaction.

Part A: Linkage Research

Introduction

What are the linkages between employee attitudes about their workplaces and customer service, market share, revenue generation, and the overall bottom line measures of business success? This is an extremely important question, and a whole area of research has been developed to study this question. Linkage research describes this research area, and the linkage research model states that the more certain leadership values and practices are present in a given work environment, the more energized and productive the workforce. This will increase the satisfaction of customers and strengthen the long-term business performance of the organization (Wiley 5).

Customer Service

There are linkages between employee attitudes about their work environment and customer service. Marcus Buckingham, who works for the Gallup organization, believes that in order to build the most powerful company possible, the first thing that needs to happen is that every person needs to be able to successfully answer twelve simple questions about the day-to-day realities of their job (LeBarre 5). This includes questions such as "Do I know what is expected of me at work?", "At work, do I have the opportunity to do what I do best every day?", and "Is there someone at work who encourages my development?" (Buckingham 6). Buckingham's team analyzed how the answers to the Q12 (the twelve core questions) shaped business results. The most engaged workplaces (those in the top 25% of Q12 scores) were 56% more likely to have higher-than-average customer loyalty, 38% more likely to have above-average productivity, and 27% more likely to report higher profitability (LaBarre 1).

There was also a strong positive correlation shown between employee and customer satisfaction in a retail branch banking survey. The customer survey contained seventy scaled items which measured opinion on bank statements, problem resolution, automated teller machines, tellers, personal bankers, physical branches, perceived value, and overall satisfaction. The strongest correlation was in customer orientation, communication, and confidence (Wiley 7). Because there was a strong correlation with customer service and employee satisfaction, the bank found that it was important to increase employee satisfaction so that their customers would become happier about the service they were receiving.

The book Organizational Behavior also talks about the link between job satisfaction and customer satisfaction. Because employees in service jobs often interact with customers, it is a valid question to ask whether employee satisfaction is positively correlated to positive customer outcomes. For front line employees who have regular contact with customers, the answer is yes (Robbins 89). The evidence states that satisfied employees increase customer satisfaction and loyalty. The likely reason for this is that satisfied employees will tend to be more upbeat, friendly, and responsive, which makes customers happier. Also, because satisfied employees will have lower turnover, customers will develop relationships with the same familiar friendly faces, which helps bolster customer loyalty (Robbins 89).

In conclusion, there is a strong correlation between employee satisfaction and engagement and customer satisfaction.

Market Share

Market share has a strong link with the amount of revenue generated. Market share has a high importance in my industry, which is electronic design automation (EDA). The big three companies in EDA (Synopsys, Cadence, and Mentor Graphics) lead in the big niches, and most of the revenue for each comes from established leadership market positions. Once the market leadership is established, users rarely change vendors for a software tool until it totally fails. (Rhines 3). Also, for the big three companies in EDA, approximately 70 - 90 % of the revenue comes from segments where the company has greater than 30% market share (Rhines 7). Because of the importance of gaining the market leadership position in impacting revenue, Mentor Graphics places a large emphasis on gaining market share in key segments, to impact revenue.

In order to gain market share, it is necessary to have employees who are fully engaged, and willing to put the extra effort into new initiatives dealing with increasing market share. Only by having satisfied employees can a company gain market share. Market share in the EDA industry can be gained in different ways: by focusing on discontinuities in the EDA market, by entering into new markets, by having strong internal development, and by having an effective sales force. All of these items require having a work force that is fully engaged and productive.

Revenue Generation and Bottom Line

There is also a strong correlation between employee satisfaction and revenue generation and bottom line. Employees that are actively disengaged costs the U.S. economy $300 billion a year