Statement of Problem
The majority of executives and leadership teams in business today are focused on managing to a specific return on investment (ROI). ROI can be measured in real terms with quantifiable results. Too often, these ROI focused executives do not manage to the “softer disciplines” such as human capital. These executives and corporate leaders are missing a huge opportunity.
The purpose of this research is to examine the impact that employee satisfaction has on the financial performance of organizations. In today's business environment, it is imperative that executives and leaders focus on the human capital of their firms and not just on their balance sheets and SG&A targets. This paper will show the direct correlation between the employee-satisfaction performance link and how it relates to company profitability.
Importance of Problem
In today's global macroeconomic environment, companies that succeed will not only manage to the bottom line, but will successfully manage their human capital. Most companies and products on the market today are faced with increased competition, the commoditization of many products and services, and an increasingly competitive global marketplace.
In this environment, a key management challenge is to create long-term, sustainable competitive advantage based on points of differentiation which are largely untapped. One differentiating factor that is largely untapped and grossly under-served is human capital. Research has shown that satisfied employees provide superior customer service, and in turn, satisfied customers are more profitable ones. Herb Keller, founder of Southwest Airlines, said “There is one key to profitability and stability during either a boom or bust economy: employee morale.” In other words, creating a work environment that motivates and satisfies employees is a key factor in achieving profitable growth and competing in the long-term.
Limitations and Delimitations
Limitations:
• Employee satisfaction directly impacts financial performance through costs and revenue
• Customer satisfaction is the (indirect) link between employee satisfaction and company profitability.
• Customer satisfaction is continually monitored by many firms, therefore data has been easy to obtain
• All research is compiled from secondary resources
• Using the data and reports from service level employees to translate to non-customer facing employees
• Indirect links between employee satisfaction on employee turnover and customer satisfaction
Delimitations:
• All research conducted is secondary only.
• Soft issues analyzed in this study are human capital only; the study would have been to large or unfocused if other disciplines were included.
Review of Literature
There have been many studies published in the service and retail sector that have demonstrated the direct link of employee satisfaction to customer satisfaction and in turn, profitability.
Methodology
Included in this paper is an in-depth compilation of secondary research and analysis of these results. The author will also tap into the various studies done over the past thirty years, as well as use the case study method in analyzing the use of human capital management as a profit making tool. Case studies will include the following companies: T-Mobil USA, Taco Bell, State Farm, American Standard, and the Ritz-Carlton.
Results
It is this author's expectation to find that the link between employee satisfaction and company profitability does extend beyond customer-facing employees to all employees in the organization. This report will show that there is a direct correlation with job satisfaction and all employees to that of a company's bottom line.
Watson Wyatt Worldwide has compiled research on the human resource practices of 1,500 firms in North American and Europe and has concluded that superior human capital practices are a leading indicator of financial performance.
© Matt Argano
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1532
Date Published :
Mar 25 2009