Employee Satisfaction Linked to Revenue & Profitability
Posted by Jeffrey Henning on Tue, Feb 23, 2010
In the paper "Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis," authors J.K. Harter (of The Gallup Organization), F.L. Schmidt & T.L. Hayes analyzed the effect of employee satisfaction and engagement on profitability, revenue and employee turnover. The study used Gallup Q12 data drawn from 7,939 business units in 36 companies and looked for differences between business units within a company based on whether they were in the top 25% on the Q12 or the bottom 25%.
- Revenue - Business units in the top quartile on employee engagement had from $960,000 to $1,440,000 higher annual revenue than business units in the bottom quartile.
- Profits - Business units in the top quartile of the employee engagement index generated 1 to 4 percentage points higher profitability than business units that were in the bottom quartile within the same company.
- Employee Turnover - When it comes to annualized employee turnover (the percent of employees leaving a business during the year), the authors looked at high-turnover companies (60-182% turnover) as a distinct category from low-turnover companies. The top quartile of business units in high-turnover companies had turnover 14 to 51 percentage points lower than the bottom quartile. For low turnover companies, the different between business units in the top and bottom quartiles was 4 to 19 percentage points.
Similar correlations between business outcomes were seen for overall satisfaction (a 1-item measure), which was not markedly superior or inferior to the 12-item engagement index. Which employee benchmark you adopt is less important than choosing one. Business units with greater employee satisfaction and engagement have higher revenues, greater profitability and less turnover. A well-implemented employee loyalty program will pay for itself in many different ways.