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STUDENT NUMBER 2014458
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MN-3501 Financial Economics
TITLE
A literary review: The role of employee/job satisfaction in firm
ASSIGNMENT TITLE performance
WORD COUNT (Actual document wordcount, but excluding reference list or footnotes)*:
1,765
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A literary review: The role of employee/job satisfaction in firm performance

 Introduction
Employee/ Job Satisfaction is the feeling of contentedness or discontent an individual feel
about his or her job. It is often used as a measurement of how well a firm treats their employees,
whereas Blum and Naylor (1967) define Job Satisfaction an employee’s attitude towards their pay,
working conditions, progression opportunities, work relations, and the recognition for their skill and
talent. A satisfied employee is often more likely to be productive than a dissatisfied employee, as
research by University of Oxford (2019) suggests that Happy workers are 13% more productive than
dissatisfied workers.
In this essay, I will critically review academic literatures such as Gonzalez et al. (2015),
Antoncic & Antoncic (2011), Voordt & Jensen (2021), as well as other valid and relevant sources, to
discover the role of employee performance and its influence in a firm’s growth and performance.
Literary Review:
Job Satisfaction's Influence on Firm Performance and Growth
A study by Gonzalez et al (2014), explores the link between employee satisfaction and a
firm’s economic performance, indicating that “attitudes like job satisfaction are relevant for any kind
of company”, as majority of firms are heavily dependent on their employees’ performance, thus the
role of job satisfaction is regarded as highly influential in relation to firm performance.
Upon further investigation, Gonzalez et al. (2014) also stated that there are various aspects
that affects the overall satisfaction of employees. Factors such as senior leadership, compensation, and
work/ life balance, heavily influences a firms performance metrics such as their return over assets,
operating margin, and revenue per employee. Furthermore, Gonzalez et al. (2014) analysed a huge
sample of 475 firms, using Glassdoor which is an employer website. The studies shows that the firms
with high employee review rating showed a higher ROA than firms with a lower employee rating,
thus proving that variables such as senior leadership, compensation and etc, plays an integral role to
how influential employee satisfaction will be in relation to a firm’s performance. However, Gonzalez
et al. (2014) mentioned that “a major limitation” of using Glassdoor, is that the review posted by
employees are based on self-initiative, thus its results when compared through traditional practices
(academic practices, firm HR practices) may be different to an extent.
The link between job satisfaction and firm performance is further supported by the study of
Antoncic & Antoncic (2011), which explores the relationship between “Employee Satisfaction,
Intrapreneurship and Firm growth”. Antoncic & Antoncis (2011) implied that employee satisfaction is
one of the vital elements that has a significant influence on the development of “entrepreneurial
activities and orientations” in the company, which is mostly related to organisational and management
support and organisational values, which are the key elements of intrapreneurship and firm growth.
For an instance, adequate pay, company benefits, and providing training may potentially encourage
employee’s self-initiative, this can lead to increased loyalty, confidence and “consequentially improve
quality in the output of employees” (Antoncic and Antoncic, 2011). In other words, if management
were to invest into these factors, this will result in employee’s to be more encourage to better their
performance of their tasks which boosts the level of their work performance which then contributes to
a better firm performance. Harter (2024) conducted a survey in US in relation to employee
engagement, highlighting the feeling of detachment of employees from their employers, which is due
to cloudy expectations, and most importantly, “lower levels of satisfaction with their organization”.
Also, the survey showed that 34% of employees (full time and part time), were engaged in their work
and workplace at midyear 2023, which then decreased to 33% for the full year of 2023. Harter (2024)
states that employee engagement was at “36% in 2020, and a peak of 40% in the same year”, with the
lowest being at 32% in 2022. According to Harter this was due to workers having unclear expectations
for their job which led to a decrease in job satisfaction. This was due to management and employees
having no formal training. Due to this there was a loss of $1.9 trillion in productivity due to
disengaged employees.

Factors affecting employee satisfaction and its connection to organisational performance:

A key factor in achieving high job satisfaction is by having a great working environment and
good colleagues. This concept aligns with Maslow's Hierarchy of Needs, where a safe and engaging
physical environment addresses the safety and belongingness needs, fostering a sense of security and
community among employees. Furthermore, the study by Voordt and Jensen (2021) emphasizes the
significant impact of the physical environment on an employee's well-being and health, highlighting
that a conducive physical setting is essential for satisfying these fundamental human needs. A poor
physical environment, on the other hand, may detrimentally affect an individual's mentality and
performance, underscoring the necessity of meeting basic physiological and safety needs as a
precursor to achieving higher levels of motivation and self-actualization. Furthermore, Herzberg's
Two-Factor Theory highlights how the physical workplace, and interpersonal relations are crucial
components of job satisfaction. The physical work environment, including areas for socialization like
break rooms, represents hygiene factors that prevent dissatisfaction, while positive interactions with
colleagues serve as motivators that actively contribute to job satisfaction and motivation. A survey
conducted by Davis et al. (2020) supports this framework, finding that such physical spaces are
“strongly related to ease of communication, higher job satisfaction, and well-being,” demonstrating
how a well-designed workplace can fulfil both hygiene and motivational needs. This may result to
increase in motivation and satisfaction, as they become more productive, having an environment with
“ease of communication” can then lead to the formation of new ideas and innovative solution to
economic issues, which makes that firm better positioned to adapt to market changes and external
pressures.
Furthermore, research conducted by Ohneberg (2023) delved into the effect of employee
satisfaction on the performance of individuals working in mutual funds. Ohneberg (2023) highlighted
the importance of norm-gift-exchange model, which highlights the “social norm for reciprocating
gifts”, implying that a person receiving a gift must reciprocate in kind. This means that when
employers implement policies that enhances employee satisfaction (such as health benefits, Employee
of the month etc.), these are the perceived as gifts by the employees. According to the model,
employees then feel a social obligation to respond with a gift of their own, which could be in the form
of increased effort and productivity. Ohneberg (2023) states that mutual fund is an “ideal setting” to
measure the effectiveness of a good working environment to employee satisfaction. This is due to
mutual funds serving as a “tangible, quantifiable connection between employee effort and
performance” (Ohneberg, 2023). According to his studies there is a positive relationship between
good working environment and employee satisfaction which impacts mutual fund performance,
having a employee satisfaction has led to an increase in mutual fund risk-adjusted performance by
1.44% per year, thus showing the importance of implementing policies that can improve employee
satisfaction.
Moving on, an article by Hee et al. (2018) highlighted multiple factors that influences
employee satisfaction such as job stress, lack of communication, and pay. According to Health and
Safety Executive (n.d.), there are six main causes of stress at work which are demands, control,
support, relationships, role, and change. This can negatively affect a firm’s performance as this could
lead to high turnover, a lower quality of work and decreased productivity (Howard Hermes
Consulting, 2023). These outcomes can significantly, hinder a firm’s profitability. Therefore, it is
essential to maintain and enforce policies that will reduce job stress such as having s good working
environment, management supports etc. Moving on, another factor that Hee et al. (2018) stated in
their article was Communication. Communication is an integral part for job satisfaction and firm
performance, as through communication, people can collaborate to make better decisions and reach
goals set by the management (Weave, n.d.). This then leads to lower turnover, higher efficiency, and
productivity, which contributes to a firm’s success. Effective communication ensures that employees
are heard and seen, which is why it’s a crucial part of ensuring job satisfaction and a firm’s overall
performance. Moving on, Hee et al. (2018) stated that “pay is the primary motivator for employee
performance and a determinant of job satisfaction”. Therefore, a poor pay will have a negative impact
on employee satisfaction, in most cases employees are more likely to look for better paying job, thus a
low pay can be detrimental to firm’s performance as this will lead to a higher employee turnover. For
an instance, Storey et al. (2009) established that poor pay was a significant source of dissatisfaction
among elder primary care nurses. This is reflected in the NHS’ increased turnover rate from 9% to
11.5% in 2022 (Shembavnekar, 2023). It is therefore important for firms to ensure that employees are
paid adequately to maintain a low turnover rate and retain employees.
Conclusion:
A key component of improving business performance is employee satisfaction, which serves as a
stimulant for growth, innovation, and productivity. The reviewed empirical studies, such as those by
Ohneberg (2023), Gonzalez et al. (2015), and Antoncic & Antoncic (2011), consistently highlight the
positive relationship between better firm outcomes, like increased returns on assets, operational
efficiency, and innovation, and contented employees. Theoretical models that clarify the processes via
which job happiness affects performance such as increased motivation, engagement, and a positive
work environment support these findings.
Consequently, healthy interpersonal relationships and a supportive physical setting at work fulfil basic
needs and are important sources of happiness, which raises employee motivation and output even
more. Furthermore, Ohneberg's (2023) norm-gift-exchange model emphasises the reciprocal character
of the employer-employee relationship, in which actions intended to enhance job satisfaction are
rewarded with greater effort and loyalty from workers.
However, the essay also acknowledges the challenges in fostering job satisfaction, including
managing job stress, ensuring effective communication, and providing fair compensation. These
elements are identified as critical to preventing dissatisfaction and fostering a positive organizational
culture that supports firm performance.
To sum up, there is ample evidence in the literature to bolster the claim that maintaining and attaining
high levels of company performance depends on employee satisfaction. Investing in strategies that
increase job satisfaction is not only good but also necessary for businesses that want to succeed in
highly competitive marketplaces. These strategies ought to centre on establishing a positive work
atmosphere, encouraging good communication, and identifying and meeting the various requirements
of employees. By doing this, businesses can develop a driven, engaged workers that spurs growth,
productivity, and innovation, giving them a competitive edge in their markets.
References:
University of Oxford. (2019, October 24). Happy workers are 13% more productive. Ox.
https://www.ox.ac.uk/news/2019-10-24-happy-workers-are-13-more-productive
Gonzalez, S., Gidumal, J., Valcarel, B., (2014). New evidence of the relationship between employee
satisfaction and firm economic performance
https://www.emerald.com/insight/content/doi/10.1108/PR-01-2014-0023/full/pdf
Antoncic, J., & Antoncic, B. (2011). Employee satisfaction, intrapreneurship and firm growth: a
model https://www.emerald.com/insight/content/doi/10.1108/02635571111133560/full/pdf?
title=employee-satisfaction-intrapreneurship-and-firm-growth-a-model
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https://www.gallup.com/workplace/608675/new-workplace-employee-engagement-stagnates.aspx
Voordt, T., & Jensen, P. (2021). The impact of healthy workplaces on employee satisfaction,
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and-costs
Davis, M., Leach, D., & Clegg, C. (2020). Breaking Out Of Open-Plan: Extending Social Interference
Theory Through An Evaluation of Contemporary Offices
Ohneberg, E., (2023, April 10). The effect of employee satisfaction on performance in mutual funds:
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Hee, O., Yan, L., Rizal, A., Kowang, T., & Fei, G., (2018). Factors Influencing Employee Job
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Health and Safety Executive. (n.d.). Work-related stress and how to manage it. HSE.
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Gulbransen, K. (n.d.). Why Is Communication Important in Business?. Weave.
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