Financial performance and the long‐term link with HR practices,work climate and job stress

Using data front a large financial services organisation in the Netherlands, this article reports a longitudinal study at the business unit level. The study addresses the question of which longitudinal relations exist between survey data on perceived HR practices, work climate and job stress on the one hand, and prospective and retrospective financial performance on the other. Data from 223 business units were available for this study. Eight scales were selected from an employee survey answered by 18,142 respondents. These were aggregated to mean scores at the business unit level. Financial performance is operationalised by a yearly profits‐to‐costs ratio. Correcting for employee and business unit characteristics, the eight survey scales predict 22 per cent of the variance in business unit financial performance in the year after the survey.‘Co‐operation between departments’ appears to be the most important predictor. Equally strong evidence was friund for a reverse causation sequence: business unit financial performance in the year before the survey was a significant predictor for four out of eight survey scales, especially for ‘co‐operation between departments’ and ‘job security’. The results underline the importance of studying variance in HR and performance variables within large organisatiuns, and the possibilities of using employee surveys in this research context. Limitations and implications of the findings are discussed.