Causal Impact of Employee Work Perceptions on the Bottom Line of Organizations James K. Harter 1 , Frank L. Schmidt 2 , James W. Asplund 3 , Emily A. Killham 1 , and Sangeeta Agrawal 1 1 Gallup, Inc., Omaha, NE; 2 Tippie College of Business, University of Iowa, Iowa City, IA; and 3 Gallup, Inc., Minneapolis, MN Abstract Perceptions of work conditions have proven to be important to the well-being of workers. However, customer loyalty, employee retention, revenue, sales, and profit are essential to the success of any business. It is known that these outcomes are correlated with employee attitudes and perceptions of work conditions, but the research into direction of causality has been inconclusive. Using a massive longitudinal database that included 2,178 business units in 10 large organizations, we found evidence supporting the causal impact of employee perceptions on these bottom-line measures; reverse causality of bottom-line measures on employee percep- tions existed but was weaker. Managerial actions and practices can impact employee work conditions and employee perceptions of these conditions, thereby improving key outcomes at the organizational level. Perceptions of specific work conditions that engage employees in their work provide practical guidance in how best to manage people to obtain desired results. Keywords employee perceptions, attitudes, engagement, satisfaction, customer loyalty, turnover, retention, business units, business outcomes, causality. Approximately two thirds of the world’s citizens age 15 or older are in the workforce (Gallup, 2010). On the basis of time allocation alone, with work occupying as much as one third to one fourth of total awake time for most working people, the con- nections between work and well-being are apparent. However, scientific studies also indicate that the quality of work conditions affects subjective well-being and health. For instance, research suggests that general attitudes toward work and mood at work spill over to mood after work (Judge & Ilies, 2004). Longitudinal research has revealed substantial relationships between attitudes at work and health outcomes such as coronary heart disease (Kivimaki et al., 2005; Nyberg, et al., 2009). In addition, general levels of satisfaction and having opportunities at work to do what one does best link to both evaluations of life and perceptions of daily experiences (including affect), after situational variables such as health, hours worked, income, marital status, education, and other demographics are controlled (Harter & Arora, 2009). Therefore, perceptions of work are important to the well-being of the people doing the work. How important are employee perceptions of work conditions to the bottom line of employing organizations? Which elements can management leverage to best obtain desired results? Research spanning more than 6 decades has looked at the relationship between employee work perceptions and performance, starting with the Hawthorne studies (Roethlisberger & Dickson, 1939). Most of this historical research has measured employee work perceptions through general questions about satisfaction with work or through the measurement of perceptions of specific facets of the job (supervision, coworkers, opportunities for advancement, etc.). Early reviewers of published studies concluded there was little or no relationship between employee work perceptions (specifically referred to as job satisfaction) and performance (Brayfield & Crockett (1955). Petty, McGee, and Cavender (1984) and Iaffaldano and Muchinsky (1985) conducted two early meta-analyses on the employee perception–performance relationship. The measures of satisfaction combined studies of overall measures and measures of perceptions of specific work facets. After conducting their quantitative reviews, these Corresponding Author: James K. Harter, Gallup, Inc., 1001 Gallup Drive, Omaha, NE 68102. E-mail: jim_harter@gallup.com Perspectives on Psychological Science 5(4) 378–389 ª The Author(s) 2010 Reprints and permission: sagepub.com/journalsPermissions.nav DOI: 10.1177/1745691610374589 http://pps.sagepub.com 378