Which comes first: Employee attitudes or organizational financial and market performance?

Abstract

Employee attitude data from 35 companies over 8 years were analyzed at the organizational level of analysis against financial (return on assets; ROA) and market performance (earnings per share; EPS) data using lagged analyses permitting exploration of priority in likely causal ordering. Analyses revealed statistically significant and stable relationships across various time lags for 3 of 7 scales. Overall Job Satisfaction and Satisfaction With Security were predicted by ROA and EPS more strongly than the reverse (although some of the reverse relationships were also significant); Satisfaction With Pay suggested a more reciprocal relationship with ROA and EPS. The discussion of results provides a preliminary framework for understanding issues surrounding employee attitudes, high-performance work practices, and organizational financial and market performance.We report on a study of the relationship between employee attitudes and performance with both variables indexed at the organizational level of analysis. The majority of the research on employee attitudes (e.g., job satisfaction, organizational commitment, and job involvement) has explored the attitude-performance relationship at the individual level of analysis. This is somewhat odd because the study of employee attitudes had much of its impetus in the 1960s when scholars such as Argyris (1957), Likert (1961), andMcGregor (1960) proposed that the way employees experience their work world would be reflected in organizational effectiveness. Unfortunately, these hypotheses were typically studied by researchers taking an explicitly micro-orientation and they translated these hypotheses into studies of individual attitudes and individual performance without exploring the organizational consequences of those individual attitudes (Nord & Fox, 1996;Schneider, 1985). To demonstrate how ingrained this individually based research model is, consider the research reported by F. J. Smith (1977). Smith tested the hypothesis that attitudes are most reflected in behavior when a crisis or critical situation emerges. He tested this hypothesis on a day when there was a blizzard in Chicago but not in New York and examined the relationship between aggregated department level employee attitudes and absenteeism rates for those departments. The results indicated a statistically stronger relationship in Chicago between aggregated department employee attitudes and department absenteeism rates than in New York, but Smith apologized for failure to test the hypothesis at the individual level of analysis.Research conducted under the rubric of organizational climate represents an exception to this individual-level bias. In climate research, there has been some success in aggregating individual employee perceptions and exploring their relationship to meaningful organizational (or unit-level) criteria. For example, an early study by Zohar (1980) showed that aggregated employee perceptions of safety climate are reflected in safety records for Israeli firms, and Schneider, Parkington, and Buxton ...

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