Employee satisfaction and firm value

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Employee satisfaction and firm value

Abstract

What’s the connection between a happy workplace and a company’s overall value? I use a novel way from finance to handle this age-old management problem. To account for the cost of raising work happiness, I look at the impact on the value of the company, rather than the productivity of individual employees. To address the issue of reverse causality, I use future stock returns to evaluate rm value and control for risk, characteristics of the firm, industry performance, and outliers. From 1984 to 2011, companies on the ‘100 Best Companies to Work For in America’ list had an increase in stock returns of 2.3-3.8 percent every year. These findings have three key consequences. There is a strong correlation between job happiness and productivity in the workplace, which is compatible with HRM ideas. Corporate social responsibility, on the other hand, may boost stock returns. The stock market does not adequately value intangible assets, thus it may be required to protect the management from short-term stock price fluctuations to promote long-term development.

Introduction

Background information

The relationship between employee satisfaction and firm value has been extensively researched in the management literature (see, for example, the survey conducted by Margolis and Walsh 2003), which typically measures firm performance in terms of accounting profits or valuation ratios, as well as in other fields. I decided to approach this long-standing management dilemma using a technique borrowed from a completely another field: finance. Employee happiness is linked to future stock returns rather than profits in this strategy, which alleviates worries about reverse causality in the workplace1. If it were large profits that contributed to employee happiness, then the high profits would imply that the company’s stock price would already be high today, and as a result, we should not anticipate any further increases in stock returns.

Objectives of the study

Most firms place employee happiness as a high concern, and for good reason. Employees who are pleased and content tend to be more productive than those who feel unhappy, irritated, or marginalized at work2. The primary goal of raising employee happiness is to have long-term employees who contribute to the success of your company, hence minimizing turnover and increasing profits. To put it another way, whether or whether you’re thinking about implementing financial incentives like bonuses or purchasing a pool table for the workplace, investing in employee happiness should help you achieve greater outcomes.

Importance

A contented employee positively approaches their work. They are proactive, productive, and dedicated to making a positive contribution to the organization’s objectives. It is more profitable to place a high priority on employee happiness since it will minimize staff turnover and boost overall business performance and productivity3. Employee happiness manifests itself in real ways that ultimately lead to an improvement in the profitability and success of a firm. Employee turnover, for example, is much lower in organizations whose workers report a high degree of job satisfaction than in other companies.

Brief literature on independent and dependent variables

Innsbruck University Department of Anesthesiology and Critical Care Medicine (UHIBK) in Austria and St Gallen Cantonal Hospital in Switzerland each received questionnaires through intradepartmental mail, together with a note and a return envelope (KSSG). A university hospital in Austria and a hospital for tertiary care in Switzerland were selected as the two research centers. The anesthetists at both hospitals are familiar with one of the investigators (A.B.). The primary investigator (J.F.K.) provided lectures and written materials to all anesthetists several weeks before the start of the trial with complete information on the inquiry. Non-responders could not be contacted since the poll was very anonymous.

Theoretical support

Indicators of job demands (complexity, unpredictability, and time pressure) and job-related issues (interruptions due to lack of focus) did not reveal any correlations with job contentment4. There is a considerable correlation between job satisfaction and characteristics related to control overwork at the workplace, such as the impact on task management and time control, as well as involvement.

Research gap

There has been previous research using employee satisfaction as a single variable in studies looking at the mediating effect of employee loyalty, but this study focused on the specific relationships between loyalty and satisfaction among employees and the ways in which these connections affect the level of employee loyalty. This study fills a need in the existing research on employee loyalty and provides valuable information. Employees in high-altitude and ecologically demanding settings have unique psychological challenges, and this article aims to identify the aspects that contribute to their overall job satisfaction.

Research questions

  • What are the factors affecting employee satisfaction?
  • What should be included in an employee satisfaction survey?
  • How do you measure employee satisfaction in research?
  • How does employee satisfaction affect performance?

Literature review

Independent variables

The condition that you adjust in an experiment is referred to as the independent variable. You have control over the variable. This variable is referred to as “independent” since its value is not reliant on and is not impacted by the status of any other variable in the experiment. This variable is often referred to as the “controlled variable” since it is the one that is being altered in the experiment. It should not be confused with a “control variable,” which is a variable that is purposefully kept constant so that it cannot influence the result of the experiment if it is used. Some of the results from prior research did not apply to overall work satisfaction. More than 75% of anesthetists in a Belgian study15 and a recent Canadian study16 both reported a high level of work satisfaction. The lower total work satisfaction in our poll may be due to the tight criteria we utilized for job happiness. Also, a difficulty is that the numerous questionnaires used have poor comparability.

No significant variations in job satisfaction between men and females were discovered in this research, and curiously, no significant differences in workload were detected. Our findings, on the other hand, show that working circumstances have a significant impact on job satisfaction. The setting in which people work has a significant impact on their sense of self-worth and the quality of their job. Anesthetists value a career that allows them to use their talents and thoughts in a meaningful way. Anesthetists can cope with excessive workloads and pressures as long as they have enough resources at their disposal. Anesthetists also need to have a lot of control over their work if they want to enjoy it. Even if you had an intriguing career, it wouldn’t be enough to make you happy at work. It has been shown that Australian anesthesiologists with a stressful work environment have a lack of regularity and control in their working lives.

Improving job happiness necessitates a focus on working environment and resources in particular (e.g. anesthetists should have a strong influence on planning and organizing their work, on their workplace and work schedule and on-time control, and should be able to choose cooperation partners)5.

Dependent variables

During an experiment, the dependent variable is the condition that you are attempting to assess. It may be thought of as being dependent on the independent variable since you are evaluating how it reacts to a change in the independent variable. The dependent variable is sometimes referred to as the “responding variable” in certain cases. It indicates that one of the most important determinants of work and organizational psychology is the degree of job satisfaction. It is often regarded as a key measure of the quality of the workplace and has a significant impact on employee well-being. 10 In their study on hospital consultants’ mental health, Ramirez and colleagues18 found that high levels of work satisfaction shielded them from the negative effects of job stress6. When high performance and a high degree of control are required, work demands and control have a variety of implications on employee well-being and health. This is in line with what we discovered.

Task demands, pay, and advancement opportunities were shown to be significant predictors of work satisfaction among Austrian and Swiss anesthesiologists in our research. Pay and advancement opportunities for Swiss anesthetists seem to be more favorable. Swiss and Austrian health care systems have quite different economic origins; therefore it’s not clear whether this is attributable to the size of a university teaching hospital or a general hospital. Anesthetists at Innsbruck University Hospital are more dissatisfied than their counterparts at other hospitals, in part because of issues like compensation and advancement opportunities. In our research, there are at least three fundamental flaws. The anesthetists who did not participate in the research cannot be referred to7. A poll of this sort cannot be based on the idea that anesthesiologists who are under a lot of stress or even burnout are the least likely to reply. Part of the low response rate (70 percent) might be attributed to the surveys’ lengthy completion time of two hours. Only self-reporting measures were employed to evaluate the working conditions. However, an objective evaluation of working circumstances may include inaccuracies as well and is probably no more reliable a priori than any other. Thirdly, the questions on the questionnaire were prepared for use in a wide range of professions and not just for anesthetists8.

The link in theory

The literature on corporate social responsibility and company value is quite similar to the research on work satisfaction and firm value. While research in Human Resource Management has discovered numerous theoretical advantages of work satisfaction, research in Management has identified several theoretical benefits of corporate social responsibility. The value of a company’s implicit claims with its stakeholders is enhanced as a result of its corporate social responsibility efforts. For example, although the compensation of an employee may be specified in his or her contract, it is more difficult to define working conditions. Staff who are treated well by their employers will be able to implicitly guarantee pleasant working conditions, which will aid in the recruitment of new employees. “instrumental stakeholder management” is a word used to emphasize the value enhancement that results from considering stakeholders’ interests. In particular, corporate social responsibility (CSR) may boost brand image, cultivate consumer goodwill, lower the chance of unfavorable regulatory action, recruit and retain high-quality personnel, and attract cash from socially responsible investors.

Hypothesis

To measure employee happiness, we look at how much they like their current job, and how much they like their future prospects. The future aspirations of one’s own job and external future prospects are both taken into account when measuring employee happiness. It is generally accepted that employee satisfaction is an employee’s overall attitude toward their work, or how they feel about their employment. This process of psychological comparison including the evaluation of current work experience according to an individual’s comparison criteria influenced pleasure to some degree. The term “employee satisfaction” refers to the pleasant or good emotional state those results from an assessment of one’s employment or work experience. It is vital to note that employee satisfaction is a key indicator of how workers feel about their work environment and the circumstances in which they do their duties. As a result, employee satisfaction relates to workers’ expectations of the workplace and their attitude toward work, which psychologically influences their capacity to perform effectively and their perception of risks. As a result, work satisfaction is a result of having part of one’s requirements addressed.

H1: Employee happiness is positively correlated with the quality of the work performed

H2: The image of a company and the happiness of its employees go hand in hand.

H3: There is a strong association between an organization’s public image and its employees’ loyalty.

References

Ramli, Abdul Haba. “Compensation, job satisfaction and employee performance in health services.” Business and Entrepreneurial Review 18, no. 2 (2019): 177-186.

Al-dalahmeh, Mahmoud, R. Khalaf, and B. Obeidat. “The effect of employee engagement on organizational performance via the mediating role of job satisfaction: The case of IT employees in the Jordanian banking sector.” Modern Applied Science 12, no. 6 (2018): 17-43.

Ćulibrk, Jelena, Milan Delić, Slavica Mitrović, and Dubravko Ćulibrk. “Job satisfaction, organizational commitment and job involvement: The mediating role of job involvement.” Frontiers in Psychology 9 (2018): 132.

Stamolampros, Panagiotis, Nikolaos Korfiatis, Konstantinos Chalvatzis, and Dimitrios Buhalis. “Job satisfaction and employee turnover determinants in high contact services: Insights from Employees’ Online reviews.” Tourism Management 75 (2019): 130-147.

Kim, Hyeli Lina, Eunju Woo, Muzaffer Uysal, and Nakyung Kwon. “The effects of corporate social responsibility (CSR) on employee well-being in the hospitality industry.” International Journal of Contemporary Hospitality Management (2018).

Shafique, Imran, Masood N Kalyar, and Bashir Ahmad. “The nexus of ethical leadership, job performance, and turnover intention: The mediating role of job satisfaction.” Interdisciplinary Description of Complex Systems: INDECS 16, no. 1 (2018): 71-87.

Soomro, Aqeel Ahmed, Robert J. Breitenecker, and Syed Afzal Moshadi Shah. “Relation of work-life balance, work-family conflict, and family-work conflict with the employee performance-moderating role of job satisfaction.” South Asian Journal of Business Studies (2018).

Brooks, Chris, and Ioannis Oikonomou. “The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance.” The British Accounting Review 50, no. 1 (2018): 1-15.

1 Ramli, Abdul Haba. “Compensation, job satisfaction and employee performance in health services.” Business and Entrepreneurial Review 18, no. 2 (2019): 177-186.

2 Al-dalahmeh, Mahmoud, R. Khalaf, and B. Obeidat. “The effect of employee engagement on organizational performance via the mediating role of job satisfaction: The case of IT employees in the Jordanian banking sector.” Modern Applied Science 12, no. 6 (2018): 17-43.

3 Ćulibrk, Jelena, Milan Delić, Slavica Mitrović, and Dubravko Ćulibrk. “Job satisfaction, organizational commitment and job involvement: The mediating role of job involvement.” Frontiers in Psychology 9 (2018): 132.

4 Stamolampros, Panagiotis, Nikolaos Korfiatis, Konstantinos Chalvatzis, and Dimitrios Buhalis. “Job satisfaction and employee turnover determinants in high contact services: Insights from Employees’ Online reviews.” Tourism Management 75 (2019): 130-147.

5 Kim, Hyeli Lina, Eunju Woo, Muzaffer Uysal, and Nakyung Kwon. “The effects of corporate social responsibility (CSR) on employee well-being in the hospitality industry.” International Journal of Contemporary Hospitality Management (2018).

6 Soomro, Aqeel Ahmed, Robert J. Breitenecker, and Syed Afzal Moshadi Shah. “Relation of work-life balance, work-family conflict, and family-work conflict with the employee performance-moderating role of job satisfaction.” South Asian Journal of Business Studies (2018).

7 Shafique, Imran, Masood N Kalyar, and Bashir Ahmad. “The nexus of ethical leadership, job performance, and turnover intention: The mediating role of job satisfaction.” Interdisciplinary Description of Complex Systems: INDECS 16, no. 1 (2018): 71-87.

8 Brooks, Chris, and Ioannis Oikonomou. “The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance.” The British Accounting Review 50, no. 1 (2018): 1-15.

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