A quantitative analysis of the relationship between employee satisfaction and financial performance in large-sized German firms

Abstract

Increasing competitive forces present a real global challenge for businesses today. Accordingly, a trend of searching inside the organization to develop new competitive advantages is growing and a larger focus has hence been put on employees as a key to corporate success. In the light of this trend, older theories of if and how employee satisfaction influences financial performance have received a new meaning. Today it is broadly recognized that such a relationship exists. The aim of this thesis is to investigate the properties of the impact employee satisfaction has on corporate financial performance in a context of German firms. Particular focus is laid on whether the strength of the relationship varies with the general level of employee satisfaction. This is made by performing a Relative Weight Analysis, in which the relative importance of different facets of employee satisfaction for corporate financial performance are evaluated in a study with158 firms in Germany during a three-year time period. The results confirm that a relationship between employee satisfaction and corporate financial performance exists, which differs between different considered facets of employee satisfaction. Preliminary evidences of a stronger relationship for companies which have more satisfied employees on average are to some extent provided, especially with regard to satisfaction with payment.