Job satisfaction and firm performance: Can employees’ job satisfaction change the trajectory of a firm’s performance?

Abstract

AbstractContemporary trends in business have focused on enhancing the employee work experience. Proponents argue that doing so will improve employees’ productivity and ultimately the firm's performance. However, critics argue that job satisfaction has only a modest relationship with an employee's job performance, and therefore, such an investment will likely have little impact on the firm's financial performance. To investigate the relationship between employees’ job satisfaction and firm performance, we collected a sample of 404 employees working in 31 firms. We tested this relationship using latent growth modeling which allows us to latently examine how employees’ job satisfaction at one time point can predict the trajectory of firm performance. Study results indicated that job satisfaction predicted a positive linear change in two financial indices of firm performance (i.e., return on assets and return on equity) over the course of four years when controlling for three indicators of firm size. These results suggest that the effects of job satisfaction on firm performance are not immediate but rather take time to manifest.