Research conducted at the Centre for Economic Performance (CEP) finally proves that organisational productivity is indeed linked to employee satisfaction. A happy workforce is definitely a better workforce.
"Our findings show that employee attitudes make a significant difference to company productivity and thereby profitability," says Professor Michael West, who recently joined Aston Business School from the CEP. "People and their attitudes to their jobs are definitely the most important company assets. Therefore companies need to focus much more on the attitudes of the workforce in order to perform well.
"This study clears up much of the confusion on the link between worker satisfaction, productivity and profitability," he continues. To date, research has concentrated on the question of whether a satisfied worker is a productive worker. And much of the evidence has suggested not. "Although there is a link between individual performance and job satisfaction, it's very weak," argues Professor West. Satisfied workers often perform badly and many dissatisfied workers often perform well.
The CEP, however, posed a new question: is the satisfaction of the workforce as a whole related to the organisation's productivity and profitability?
CEP researchers addressed this question to 42 UK manufacturing companies (largely in mechanical engineering and plastics and rubber) and over 5,000 employees who answered questions about their satisfaction with 15 different aspects of their work ranging from physical working conditions, to fellow workers, the amount of variety in the job, rates of pay, job security, chances of promotion and management/worker relations in the company. Those participating in the research indicated the extent to which they were dissatisfied or satisfied with each of these aspects of their work. Researchers then explored whether these satisfaction ratings predicted the performance of the company (based on a range of information drawn from the company's financial accounts) a year later.
"Our results show that a company's job satisfaction figures taken as a whole can predict a large part - up to 25 per cent - of the variation between companies in performance," says Professor West. "We also found that collective job satisfaction is a reasonably good predictor of profitability one year later. Basically we show that employee satisfaction leads to higher productivity and improvements in productivity eventually lead to greater profitability."
To ensure these findings don't merely show that in a company which is performing well, employees generally feel satisfied, researchers undertook a further stringent test of the data. Researchers took out the effects of company performance for the three years before they measured job satisfaction and then tested whether they could still predict company performance three years later. "To our surprise we found that we could still account for a highly significant (11 per cent) of the change in com-pany performance," says Professor West. "No other factor we examined (such as competitive strategy, technology, market share, Total Quality Management or R& D strategy) could so effectively predict company performance."
Companies need to focus much more on the attitudes of the whole workforce in order to perform well
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