Measuring Increases in Employee Satisfaction
It is more difficult to measure financial returns on increases in employee satisfaction because many employee satisfaction benefits are also intangible. Therefore, to objectively and accurately measure returns on increased employee satisfaction, it is recommended that one focus only on the tangible benefits, which include reduced turnover, increased organizational commitment, and enhanced innovation and creativity.
Many studies suggest that the cost of turnover is one-and-a-half times an employee’s salary, when considering recruitment, selection, and training costs. Therefore, to monetarily measure the impacts of reduced turnover, one can evaluate the retention rates before and after similar implementations and calculate the expected cost of replacing employees who chose not to leave as a result of increased employee satisfaction.
Measuring increased organizational commitment can be more complicated, but when simplifying commitment to include only internal growth and advancement, one can easily estimate the cost savings associated with promoting from within rather than having to hire externally and train a replacement. This cost savings can be seen as one of the financial benefits of increased employee satisfaction.
Finally, when evaluating levels of enhanced innovation and creativity, one should examine the quantity of new services/products and any process improvements that speed up the production time. The revenue from the new products as well as the monetary value of the time saved in process improvements can be considered the final tangible benefit resulting from increased employee satisfaction.