Predicting business unit performance using employee surveys: monitoring HRM-related changes

Abstract

Organisations are increasingly using strategy tools such as workforce scorecards to keep track of human resource management related change processes that have been implemented and the effects of these on business unit performance. However, in this area, the challenge of finding appropriate indicators, establishing temporal relationships and providing useful management information still remains. Using longitudinal archival data from 171 branches of a large financial service organisation, this study examines to what extent employee surveys can serve as a predictor of better financial performance at the branch level. Results from a series of models in AMOS (Analysis of Moment Structures) showed that a significant part of branch profits could be predicted using employee surveys after correcting for prior profits. Based on extrapolation to all branches of this organisation, the changes in employee survey scores predict higher yearly profits of 178 million euros (17.9 per cent of the total yearly profits) across the entire company. Implications for research and practice are discussed.