Exploring The Link Between Employee Satisfaction & Company Performance

Believe it or not, employee satisfaction has a direct link to a company’s bottom line. Glassdoor research shows that it all starts with the company’s culture and work environment, as well as how managers engage staff and promote the corporate brand. Why? Because when staff is engaged and believes in their company’s vision, they perform better. Better performance results in higher earnings and profit margins, which boosts employee morale. It’s a win-win.

The “Family Firms, Employee Satisfaction, and Corporate Performance” study from the University of Kansas analyzed 100,000 Glassdoor employee reviews between 2008 and 2012. What they studied by analyzing these reviews was whether company ratings predict two commonly used measures of financial performance: Tobin’s q (which is a measure of a company’s current market value) and return on assets.

They found that a one-unit change in company rating on Glassdoor’s scale of 1 to 5 has a 0.141 effect on the market value of companies, as measured by Tobins q.

How big is that effect? The average Tobin’s q is 1.79 for the companies they studied. So that’s a 0.141/1.79 = 7.9 percent average jump in company market value from a 1-star increase in employee satisfaction — a huge economic effect.

While not every company currently encourages employees to submit reviews on Glassdoor, those companies that do are able to generate similar levels of employee satisfaction. And that means higher profit potential.

If your executive team is motivated by little else than the bottom line, here are seven tips to keep employees engaged and the profits on the rise.

1. Have an open dialog. Communication and transparency are key. Employees perform better when they understand what’s expected of them and are able to openly discuss their career path and goals. By communicating the company’s goals as well, employees have a better understanding of how their job fits into the bigger picture.

2. Lead by example. Managers set the tone for the workplace. There’s a spotlight on company leadership, and how they manage, communicate and embrace the corporate culture trickles down to all levels of staff — junior staff often mimic these behaviors.

3. Recognize good work. Giving recognition where it’s due affirms to employees that their work is valued. Consider sending a weekly email about a team’s accomplishments and rewarding teams with a small perk when they meet major milestones.

4. Train. Employees want to be able to learn and grow in their roles, and to do this, companies need to provide proper training. Have regular discussions with individual staff to understand their career goals and the progress they’re making towards these. A robust learning and development program will help an employee grow and refine different skills.

5. Values, mission and purpose matter. Provide a sense of purpose to keep employees more engaged and help them understand what they’re working towards. Employees will have better performance when they understand a company’s impact to the larger community. Incorporate into performance reviews and other metrics these values so that people have a clear understanding of the company’s goals and how they are working to achieve these.

6. Accessible leadership. Employees like to be able to exchange ideas with leadership. By listening and implementing some of these ideas, employees will feel valued and empowered because they know that they can have a direct impact on the business.

7. Volunteer as a team. Everyone loves to give back to their community. Volunteer events help people understand the impact of their work. Using the company’s expertise to help a community helps a company give back by using what its employees know best. Ways to do this would be for a paint company to have a day where employees paint a school or neighborhood block to create a more positive environment, for example, or for a branding or marketing firm to provide services to a business only employing disadvantaged groups. While these projects help a community, they also provide a team building opportunity.

This article originally appeared on the Glassdoor Innovation Lab.

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