The Economic Impact of Employee Behaviors on Organizational Performance

Cascio, Wayne
California Management Review Vol. 48 Issue 4, p. 41-59

The behavior of employees has important effects on the operating expenses of organizations in both the private and public sectors. While these effects are not widely known (or even, in some cases, appreciated by employers), they are, nonetheless, quite substantial. This article considers some key areas where the behavior of employees has a meaningful financial impact on their organizations. The areas it examines are: the effects of high- versus low-wage employment strategies on employee turnover and productivity; the importance of employee retention; absenteeism and presenteeism; healthcare costs associated with unhealthy lifestyles; employee attitudes; payoffs from training through development programs; and payoffs from the use of valid staffing procedures. While these areas are by no means exhaustive, they are representative of those that most employers encounter. This article also presents strategies for employers to improve the performance of their organizations by managing people wisely and illustrates its analysis through a comparison of the employment strategies of two well-known retailers, Costco and Wal-Mart’s Sam’s Club.