… line by 3.5% pa by engaging your employees.
Corporations listed in Fortune’s ‘100 Best Companies to Work For in America’ had equity returns that were 3.5% per year higher than those of their peers, indicating that employee satisfaction correlates positively with shareholder returns, says Alex Edmans of the Wharton School.
Alex Edman’s has produced a paper called Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices with some exciting results – not only do the 100 Best Companies to Work For in America earn better returns for their shareholders, but the stock market doesn’t fully value intangibles and socially responsible investing is likely to also improve investment returns.
This is the birth notice of the socially-responsible corporation?
For employee satisfaction to lead to superior returns, this requires that employee satisfaction is both bene cial for rm value and not immediately capitalized by the market.
It sounds as if keeping the employee happiness factor away from the ‘bean counters’ it might mean they can’t take advantage of it and destroy the advantage. On the flip-side, letting people know about employee satisfaction levels and their importance will lead to greater investment and also help bring in employees looking for a better worklife.
The results are consistent with human relations theories which argue that employee satisfaction causes stronger corporate performance through improved recruitment, retention and motivation, and existing studies of underpricing of intangibles and long-run drift to corporate events.
Human Resources has been right all along? Calloo callay!
If you’d like to read the entire paper, which has more than a few mathematical equations in it, just click here
– Not-for-Profits do not have shareholders, they do have stakeholders and donors are looking to invest in good organisations who produce maximum benefit to the community for their dollars.
– What if NFPs and Charities could harness the power of employee satisfaction, how would that effect churn, or working with volunteers, or organisational knowledge, or corporate partnerships if they could deal with one person for more than 18 months?