According to modern scientific management theories, Employee satisfaction, Productivity, Performance, Customer satisfaction and the organization financial performance are interlinked. Any changes caused to any one of the above parameters may have strong impacts upon other parameters. Even though an organization may have lot of resources, human resources or the employees seem to be the most vital one because of the necessity of employees in mobilizing all the other organizational resources. In other words, employee performance and productivity is linked with the mission, vision, objectives and goals of the organization.
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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) 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 (Linking Employee Satisfaction with Productivity, Performance, and Customer Satisfaction, 2003, p.1)
Employees are the only active element in an organization. All the other organizational resources are passive and need the support of human element to deliver the goods. In other words employees are the drivers who drive the organizational resources in a particular direction to meet the organizational goals. If the drivers or the employees are incapable of driving the vehicle properly, it is difficult for the organization in reaching the target or meeting the goals. Only the satisfied drivers will keep the vehicle in good condition by driving the vehicle safely and effectively. Dissatisfied drivers will never bother much about the conditions of the vehicle or the negative impacts of crazy driving habits. Proper driving will help the vehicle owner to reduce maintenance cost of the vehicle which will increase his profits.
“The 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” (Linking Employee Satisfaction with Productivity, Performance, and Customer Satisfaction, 2003, p.2). Many people often raise the question - which one evolved first; hen or egg? The same question is asked in the organizational world also – whether good human management practices lead to better organizational performances or better organizational performances lead to good human management practices? The above question often yields mixed answers. This is because of the myths prevailing in organizational world. Some organizations provide better facilities to its employees only when the organization’s financial performances exceed the expectations. On the other hand, well managed organizations are always keen in providing better facilities to the employees irrespective of its financial performances. Paul Krugman, the Nobel Prize winner and the renowned American economist, recently asked American government to increase spending to increase the economic activities in the country and to escape from the recent recession problems. The same economic principle is applicable in the organizational world also. Better investments on human resources will make the employees satisfied and their satisfaction will be reflected in the organization’s future performances. No satisfied employees may work against the interests of the organization whereas dissatisfied employees may work against the organization’s interests.