Research Brief: Happy Workers, Happy Customers

What Did the Study Look At?

Managers and HR departments spend considerable time ensuring workers like their jobs. They assume that satisfied employees lead to productive employees and happy customers. They’re probably right: the evidence shows that there’s indeed a positive relationship between job satisfaction and productivity, though which drives the other is uncertain.

Still, with job satisfaction there’s plenty of room to go wrong. If workers have too much leisure time, for example, they can hardly be productive. These researchers looked at a number of factors that could affect the link between job satisfaction and productivity, defined in this study as customer satisfaction and product sales. One factor is how job satisfaction varies among co-workers and how widely it’s shared within an organization. Another is how customer word-of-mouth or co-worker appreciation affect employee satisfaction and sales over the short and long term.

This study centred on a large commercial bank in South Korea. It looked at employee job satisfaction, peer evaluation, customer satisfaction and willingness to recommend to potential customers, and branch-level sales.

How Was the Study Designed?

The researchers matched data from a 2010 employee survey with a separate customer survey; in all, the study looked at 1,560 workers and 10,215 customers in 279 bank branches in South Korea. As well, they added information on wages per worker, job titles, and demographics of the areas served by each branch in the sample. Armed with data from both individual workers and branches, they linked job satisfaction to peer evaluation, customer satisfaction, and sales to new and existing customers.

What Did the Study Find?

• Higher individual job satisfaction was positively associated with higher peer evaluation in the workplace and customer satisfaction, higher sales, and greater willingness to recommend to others.
• While in the short term, individual job satisfaction directly increased sales to existing customers, in the long term, it indirectly decreased customer satisfaction and word-of-mouth. The researchers believe this may be explained by excessive sales to existing customers who, over time, become less willing to speak highly of the business.
• Branches with higher average job satisfaction had higher sales and customer satisfaction ratings, stronger word-of-mouth, higher peer evaluations, and higher sales per worker.
• Branches with higher dispersion of job satisfaction among workers experienced lower sales, lower consumer satisfaction, weaker word-of-mouth, and lower sales per worker.

What Do I Need to Know?

There are several noteworthy takeaways from this study. One is that firms with happier workers sell to more customers and enjoy higher levels of customer satisfaction and word-of-mouth.

Another is that average job satisfaction and how it’s spread among workers in a business unit are equally important to understand employee productivity, whether “productivity” involves product sales or another key business outcome.

As the researchers noted: “A powerful recommendation that arises from our results is that firms not only ought to increase the job satisfaction of their workers, they must also worry [about] the dispersion of satisfaction among them.”

For sales managers, the study raises a red flag on the potentially cross-cutting effects of job satisfaction on short- and long-term outcomes. In the short term, high job satisfaction translates into high number of products sold to existing customers. But in the long term, this could have unwelcome downstream effects if it means that customers become, in effect, burnt out and less willing to share positive word of mouth.

Happiness in the workplace, the researchers noted, “must be managed to the point where the benefits of policies designed to enhance job satisfaction in the workplace are not offset by their (long-term) costs.”

Title: Does Job Satisfaction Increase Sales and Customer Satisfaction? Evidence from Retail Banking in South Korea

Authors: Ricard Gil (Smith School of Business), Myongjin Kim (University of Oklahoma), Inhyouk Koo (IE Business School)

Published: The B.E. Journal of Economic Analysis & Policy, vol. 17 no. 3, 2017

—Alan Morantz