Summary
Numerous studies have addressed the relationship of nonfinancial performance measures and financial outcomes. We investigated the causal relationship between employee attitudes and a firm's financial performance using 14 banking centers from one bank, over a two and one-half year period. Data revealed that when banking centers experienced a positive change in financial performance, employees were more satisfied and committed to that center, and perceived that center as more fair. In contrast, if a banking center did poorly, its employees were less satisfied and committed, and had lower perceptions of fairness. These findings support the model that financial performance leads to employee attitudes rather than the reverse.
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Extract
Examining the Relationship Between Employee Attitudes and a Firm's Financial Performance: A Theoretical Framework and Causal Investigation
Since the introduction of the balanced scorecard (Kaplan and Norton, 1992), accounting researchers have conducted numerous studies that examine the relationship of non-financial measures with firm performance (see, for example, Ittner and Larcker, 1998; Hoque and James, 2000; Banker et al., 2000; Ittner et al, 2003; Davis and Albright, 2004). Kaplan and Norton (1996) argue these non-financial measures may be better predictors of performance than traditional financial accounting measures.
The assumed relationship between non-financial measures and performance is that non-financial measures drive performance. Employee attitudes often are used as non-financial measures of performance. However, Schneider et al. (2003b) have developed a model that suggests performance (i.e., financial outcomes) drives employee attitude, rather than the reverse. Our research empirically explores this relationship.BACKGROUND AND MODEL DEVELOPMENTThere are important reasons for studying the links between financial performance and employee attitudes. Research suggests that when customers are more satisfied with a firm, they increase th...See the full content of this document
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