Closing the Scientist-Practitioner Gap: Employee Satisfaction and Success

Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: a meta-analysis
Harter, J.K., Schmidt, F.L. and Hayes, T.L. (2002)
Journal of Applied Psychology
Vol. 87, pp. 268-79.

Why do employee satisfaction and engagement matter? They’re just based on employee opinions. Do they really have any bearing on hard business outcomes? Turns out, there is a lot of evidence that they have a HUGE impact.

In one of the most telling examples a meta-analytic research study by Harter, Schmidt, and Hayes looked across a multitude of studies to find out exactly why employee engagement is important for organizations. Specifically they looked at business unit level employee engagement data and at business unit level outcomes like customer loyalty, profitability, productivity, employee turnover, and safety across a large variety of industries, 7,939 business units, and 198,514 employees. They hypothesized that they would find positive relationships between these business outcomes and employee engagement. Further, they show exactly how important employee engagement is in showing the magnitude of the differences in these outcomes across engagement levels (top and bottom quartiles of engagement levels).

Across all business outcomes the researchers demonstrated a strong relationship between employee engagement and the business results. As hypothesized, employee satisfaction and employee engagement had positive and significant correlations with customer satisfaction, profitability, & productivity and negative relationships with both turnover and safety. The correlations for overall satisfaction and employee engagement were highest for customer satisfaction–loyalty (.32 and .33, respectively) and employee turnover (-.36 and -.30), followed by safety (-.20 and -.32), productivity (.20 and .25), and profitability (.15 and .17). Further, the findings for business unit performance are very positive (.37 for overall satisfaction and .38 employee engagement).

Further, the authors performed some utility analysis across 5 organizations which had the same business outcome data to understand the magnitude employee engagement has on the business. Comparing the top and bottom quartiles of employee engagement they estimated the organizational impact of bringing the bottom scores to equate with the top scores.

  • Customer satisfaction/loyalty – Employees with higher engagement received 2%-4% higher customer satisfaction ratings. For most large organizations with several business units this would be a difference in millions of dollars.
  • Profitability – On average, business units in the top quartile on the employee engagement measure produced 1%-4% higher.
  • Productivity – Business units in the top quartile on employee engagement had $80,000 to $120,000 higher monthly revenue or sales. At the lower end of $80,000 difference per month, this difference translates into $960,000 per year per business unit.
  • Turnover –Turnover was broken into high and low turnover companies.
    • High turnover companies the difference between the top and bottom quartiles ranged from 14% to 51%.
    • Low turnover companies the difference between the top and bottom quartiles ranged from 14% to 51%.

Article by Brandon Jordan

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