The ROI of Employee Engagement

5 Feb
Yet another study showing that more engaged employers enjoy financial rewards was reported by the web site Knowledge @ Wharton. The paper, which is available to download, reports:

In a paper titled, “Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices,” (Wharton finance professor Alex) Edmans examines the stock returns of companies with high employee satisfaction and compares them to various benchmarks — the broader market, peer firms in the same industry, and companies with similar characteristics. His research indicates that firms cited as good places to work earn returns that are more than double those of the overall market.

Companies on Fortune magazine’s annual list of the “100 Best Companies to Work for in America” between 1998 and 2005 returned 14% per year, compared to 6% a year for the overall market, according to Edmans. The results also hold up using an earlier version of the survey that dates back to 1984. “One might think this is an obvious relationship — that you don’t need to do a study showing that if workers are happy, the company performs better. But actually, it’s not that obvious,” says Edmans. “Traditional management theory treats workers like any other input — get as much out of them as possible and pay them as little as you can get away with.”

This study corroborates our own research, as well as twenty-seven other studies we’ve collected over the years for our book Lucky To Work Here. If you would like a copy of a bibliography of those studies, please email at markhirschfeld@gmail.com— I’d be happy to send it to you.

The evidence is now clear– there is a business imperative to creating a more engaged workplaces. Let’s get to work!

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