The Relationship Between Employee Satisfaction and Overall Productivity in the Organization

According to surveys conducted in 2004, more than half of all Americans are unhappy with their jobs, a figure that is up from the 40 percent who expressed dissatisfaction only a decade ago. According to the study, there are a number of factors contributing to the decline that can be seen across all income levels. These factors include constantly changing technological requirements, rising productivity demands, and changing workplace expectations on one side and a changing view of the role of work in the lives of incoming workers on the other (Franco, 2005).

Research conducted through Purdue University to help improve productivity and customer satisfaction has revealed a direct link between employee happiness and customer satisfaction as well as overall profitability (Childers, 2005). Once it is understood how staff satisfaction can affect productivity as well as a company’s standing in the competitive market, it is necessary to grasp the key components of increasing staff satisfaction within the organization to begin reform.

Employee satisfaction has been proven to be directly related to overall productivity within an organization, whether the employees are in direct contact with the end consumer or not.

This relationship can perhaps best be seen in the service-profit chain described by a report given by members of the Harvard Business School faculty. According to authors James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger, there are several links in this service-profit chain beginning with the premise that profit and growth are stimulated primarily through customer loyalty.

This loyalty is dependent on customer satisfaction which is influenced in turn by the value of services provided to the customer. The value of these services comes from employees who are happy, loyal, and productive. Yet, employees can only be happy, loyal, and productive when they have a responsive, results-oriented support system backing them up (Heskett, et al, 1994).

A decade later, the Purdue University study supported this service-profit chain in reverse by focusing on the employees within corporations who had little to no actual contact with the end consumer. This study also demonstrated that the happy employee deep within the company is more likely to work hard to help other employees within the company with whom they have contact. These other employees, feeling their voices are heard and satisfied that their needs are met, are then more likely to take a personal interest in pleasing the customers.

These satisfied customers increase exponentially into a loyal market base and much greater profitability for the company (Childers, 2005). More than a cooperative team working together to meet the customers’ needs, companies with happy, productive employees increase their productivity simply by reducing the need to train new employees as a result of high turnover thanks to increased employee loyalty.

This employee loyalty developed as a result of customer service within the organization further translates to a more competitive market edge. Loyal employees have an active interest in helping their company be successful. This translates into enhanced customer service on all levels. This increased customer service offers a competitive edge that “creates volume, extended stays, repeat business and the always valuable word-of-mouth recommendations to build your future business” (Enhance Your Competitive Edge, n.d.).

Although it is difficult to quantify the exact value of these concepts, a few statistics can help to illustrate the great potential inherent in quality services. Based on information collected, the SPSS reported only 4 percent of all customers with problems complain, but the average person with a problem will eventually tell 9 other people about it. Satisfied customers, on the other hand, will only tell 5 other people about their experience. Since the cost of acquiring a new customer is estimated to be between 5 and 7 times greater than the cost of retaining current ones, the importance of staff satisfaction in retaining a competitive edge is emphasized further by the estimate that the cost of hiring and training a new employee is up to 10 times greater than retaining current ones (Using Satisfaction, 1996).

Contributing on a more subtle scale, staff satisfaction provides companies with the ability to quickly react to changes in their customer base or to developing problems within their own organization.

By encouraging open communication between all levels of staff, employees in direct contact with customers can more quickly and easily solve issues and report changes or requests. Employees who are not in direct contact with customers also have the opportunity to report inefficiencies, shortages, or issues in trying to meet customer concerns (Using Satisfaction, 1996). Open communication leads to feelings of ownership among the employees who will, in turn, tell other workers about the company, further enhancing its competitive edge in the ability to attract and retain the best talent in the area.

Understanding the benefits to both productivity and competitive edge in establishing high levels of staff satisfaction within an organization, it is also important to understand the various factors that can impact how happy employees are within an organization.

Although it might be supposed that wages and benefits carry the lion’s share of the weight in measuring staff contentment levels, reports indicate there are a variety of other factors that bear the significant weight of their own. According to Bavendam Research, the largest factor contributing to employee satisfaction is not fair rewards but a real opportunity for the individual (Bavendam, 2005).

It is important to note that opportunity in this sense is not referring to promotions only, but also to the opportunities to take on new challenges, solve problems, and gaining increased responsibility. Continuous high job stress was the second strongest factor reported in this study. In discussing this aspect, researchers pointed out that job stress was not necessarily referring to the actual challenges of the job itself, but rather to the extent to which either the job performance or the worry and concern about the job interfered in individual employees’ lives. The more the job inserted itself into personal lives, the higher stress was associated with it. More stress equaled significantly less employee satisfaction.

The remaining four factors contributing to staff satisfaction in decreasing relative strengths were listed as being company leadership, work standards within the workplace, fair and adequate rewards for the work performed and adequate authority being distributed among employees for them to accomplish the tasks required of them. All four of these factors can be grouped under the major heading of organizational culture and warrant a closer look into what this entails.

Organizational culture is a significant driver of employee engagement and satisfaction which can ultimately lead to the success or failure of a company. This heading deals in large portion with management within the company as well as with work standards, fair compensation, and the opportunity for individual responsibility. It is up to management to design jobs well, provide adequate support, and set goals for the employees within an organization so as to provide them with challenges to meet and methods of measuring performance (Childers, 2005).

As has been shown, open communication from both the top-down and the bottom-up is essential to developing a culture in which all members feel important to the success of the whole. Management can encourage this communication model by providing ample opportunities for employees to submit feedback and showing a response to that feedback. Training manuals for management employees stress the importance of management’s role as a personal coach to identify strengths and weaknesses, the role of advisor to identify areas in which employees might excel, and the role of the appraiser to offer both positive and negative feedback to employees in a nurturing environment that encourages growth (Employee Development, 2003).

The positive work environment thus created leads naturally to more effective problem-solving and conflict resolution within the workplace, resulting in higher work standards and happier employees.

Although compensation rates can fluctuate, if employees further have the authority to make decisions that affect their ability to perform the tasks assigned them, less frustration is able to build up and conflicts can be handled quickly and effectively at lower levels.

With an adequate work environment that focuses on high standards, open communication, and quick conflict resolution, employees become happier and more willing to take ownership of the success of the company as a whole. This engagement of the employees further leads to much more effective customer service, especially when coupled with employees who have adequate authority to deal with concerns at the lower levels, which leads to much-improved customer satisfaction.

Productivity is also increased when employees are satisfied as absentee rates decrease and employee turnover is reduced. When happy customers are created, they are more likely to become repeat customers and will help the company through word-of-mouth advertising. In addition, happy employees encourage other talented, motivated workers who wish to work in such a positive environment to apply to open positions within the company, increasing the company’s competitive edge in a variety of fields at once.


Bavendam Research Incorporated. 2005. Managing Job Satisfaction. Special Reports: Effective Management Through Measurement. Vol. 6. Web.

Childers, P. 2005. Your Message Inside Goes Outside: How employees are treated within the company dramatically affects customer satisfaction and profits. HR Magazine. Web.

Employee Development and Training. 2003. Guide to Managing Human Resources. Ch. 11. Web.

Enhance Your Competitive Edge Through Customer Service. (n.d.). Wisconsin: The Official Web Site of the Wisconsin Department of Tourism. Web.

Franco, L. 2005. U.S. Job Satisfaction Keeps Falling, The Conference Board Reports Today. The Conference Board. Web.

Heskett, J.L.; Jones, T.O.; Loveman, G.W.; Sasser, W.E. Jr.; Schlesinger, L. A. 1994. Putting the Service-Profit Chain to Work. Harvard, Harvard Business Review.

Using Satisfaction Surveys to Achieve a Competitive Advantage. 1996. SPSS. Web.

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