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Employees are the real assets of the companies of course so as to gain the profitability, success and stability. And thus company and management should be a lot focused towards this asset in order to make them really workable in aligned towards the ultimate objectivity of the company. And this can only be done by making them satisfied, loyal by compensating them in a fair and equal level according to the level of the involvement which they want from them. The real words that can be used to summarize all this are the BENEFITS and COMPENSATION given to the employees. Employee benefits typically refers to retirement plans, health life insurance, life insurance, disability insurance, vacation, employee stock ownership plans, fringe benefits (Tangible) or appreciation from a boss, likelihood for promotion, nice office, etc (Intangible) etc and Compensation is payment to an employee in return for their contribution to the organization, for doing their job and the most common forms of compensation are wages, salaries and tips.
The ultimate goal of the company (profit maximization) is attained for sure by satisfying the employees proving that there is a relationship between the employee's performance and the financial performance of the company. "There is one key to profitability and stability during either a boom or bust economy: employee morale (Herb Kelleher, founder of Southwest Airlines). Technology, innovation, and even a good product can have an alternative and fear of being replaced so the uncertainty of the environment can only be strongly competed by having the satisfied employees giving them the competitive advantage and generating superior customer satisfaction that are more profitable ones making the financial performance according to the demands. In other words, creating a work environment with satisfied and motivated employees has been proven critical to achieving profit goals. So employee satisfaction is a key to employee engagement, and companies with engaged employees have customers who use their products more often, resulting in greater profitability and financial performance. Hence there is a direct link between employee satisfaction and customer satisfaction, and subsequently between customer satisfaction and improved financial performance."
Studies such as Frederick Reichheld's "The Loyalty Effect," (1996) and James Heskett, W. Early Sasser, and Leonard Schlesinger's "The Service Profit Chain" (1997) produced the first sets of hard data quantifying these links. Both studies conclude that there are direct and quantifiable links between customer service variables (such as satisfaction and loyalty), employee variables (such as satisfaction, enthusiasm, loyalty, commitment, capability, and internal service quality), and financial results. Dr. Thomas Rollins of the Hay Group study on the employee opinion and business performance relation showed that company wide employee satisfaction affect business unit employee satisfaction which affect business unit financial results, which in turn affect company wide financial metrics.
2001 study published in Personnel Psychology showed that the satisfied employees bring more profitability to the company. Watson Wyatt Worldwide Human Capital Index study suggests that effective human resources practices lead to positive financial outcomes more often than positive financial outcomes lead to good practices. "It's common sense. When people feel great about the place where they workâ€¦they provide better customer service."(Dick Clark, Group Leader of Financial Services at Monsanto) .Benefits rewards increase the work efforts (Green and McIntosh, 1996).Spock says that a work environment enhanced by fair compensation and benefits would reduce stress, create a positive atmosphere, and, therefore, increase employee engagement leading of course towards the great productivity and of course financial performance. Watson Wyatt Worldwide, a human capital consulting firm that studies the value of human capital programs, conducted research of 1,500 companies' HR practices in North America and Europe, the results of which indicated that superior human capital practices are a leading indicator of financial performance.
There are different factors that can prove the importance and the relationship between the employees and the financial performance of the company like ethical and fair response form a long term relation with the employees giving them the surety of the bad times making them loyal enough to be working harder for the company's objectivity. No one is more closer to the customers than the employees so their satisfaction will be very important in order to make the customer attracted, satisfied and loyal. Whenever the benefits and the rewards are fair enough to motivate then it is also make sure that there should be the proper know how and alignment between the employees and the company's goals in order to achieve better performance. Moreover the loyal, satisfied and empowered employees may give the enough satisfaction to all the customers that they would be given a positive feedback would of course like to invest or spend their money at making the financial performance more appreciating. Companies which understand the sense of the employee-to-customer-to-profitability chain constantly measure everything happening in the company, customer satisfaction, employee satisfaction, process efficiencies, strategies, everything. This enables them to determine what's working and what's not, and to make adjustments accordingly. This continuous check and balance enables the company to benefit by modification of fresh ideas and new perspectives by eliminating the deficiencies. Proper and clear communication and relevant and needed training may give the employees a sense of dignity and honour making them loyal and that much beneficial towards the company to improve its financial performance by attaining the objectives. The overall commitment to the long-term encourages employees to remain employees, and strengthens their ability to contribute to your financial performance year after year.
Here one more aspect can also be seen which is the distribution of shares to employee based on the assumption that share ownership induces positive attitudinal and behavioural responses from them making positive effects on the financial performance of the company.
So the link or the relation between employee satisfaction and financial performance is undeniable, based on numerous studies that show the effect of both on one another. As a result, companies have a rare opportunity to gain competitive advantage and differentiation by dealing properly with their greatest asset: their employees. Employees, in fact, are the most critical point of differentiation for any company in today's business environment. The relation and its effects are clear: Satisfied employees generate satisfied customers, who in turn build long-term relationships-and spend more money. With stronger leadership and a workplace that understands and values the power of employees to impact financial results, the possibilities for growth are endless.
Instead of the immense importance many companies still neglect the importance of relationship employee's benefits & compensation with company financial profitability the reason of writing this paper is to find out practical importance of the relationship between financial performance and employees benefits & compensation.
Abrams, F.W., "Management's Responsibilities in a Complex World," Harvard Business Review 29, 1951, pp. 29-34.
Namara C. M. "Employees benefits and compensation". Authenticity Consulting ,LLC.
Spock . "employee benefits turnover and productivity"
Loren . Gary ( Harvard Business Online editor)
Heskett's article, HBR.
ww.marketinginnovators.com (2005 Marketing Innovators International, Inc.)
2001 study published in Personnel Psychology
Dick Clark, Group Leader of Financial Services at Monsanto