Satisfied Employees Boost Your Stock Price - Network for Business Sustainability

Satisfied Employees Boost Your Stock Price

Studies show being a good employer fosters productivity in your workforce – and drives performance.
Lindsey Williams May 13, 2013

Being a good boss is good for your bottom line.

The greater job satisfaction your employees experience, the higher your stock price will be.

That’s the finding from Alex Edmans of The Wharton School at the University of Pennsylvania and colleagues. Analyzing data from 1984 to 2011, the researchers discovered that companies listed on the 100 Best Companies to Work for in America produced 2.3 to 3.8 per cent higher stock returns every year.

“This is an important research finding for managers who invest in employees, but wonder if those investments have measurable, financial payoffs,” says management professor and NBS Executive Director Tima Bansal. “This research shows there is a significant difference in financial performance in companies where job satisfaction is high versus companies where it is low.”

Give the Gift of Pleasant Working Conditions

The researchers posit that employees view pleasant working conditions as a “gift” from their employer. In turn, they respond to the firm with a gift of their own: increased effort. Examples of pleasant working conditions include employer-employee trust, employer fairness, camaraderie amongst colleagues, and the pride an employee exhibits for his or her workplace.

One company topping the list of 100 Best Companies to Work for in America is Google. Employees of the web giant enjoy massages, climbing walls, foosball tables, and round-the-clock meals in high-end cafeterias. And Google’s stock price speaks for itself: according to an article in USA Today, the company’s stock price has increased 674 per cent since its public launch in 2004.

Key characteristics of companies in the 100 Best Companies to Work for in America were:

Job Satisfaction Creates Competitive Advantage

Retaining your brightest assets – your employees – increases your capacity to maintain corporate advantage in the marketplace.

“Job satisfaction is positively correlated with shareholder returns, but only in the long run,” said the researchers. “Even if managers [receive] external verification for their firms’ levels of job satisfaction, for example through the Best Companies survey or outside consultants, the effect on the stock price is unlikely to be immediate.”

Being Good is Good for the Bottom Line

Employee job satisfaction leads to stronger corporate performance over the long term. You can increase your employees’ job satisfaction by improving communication, fostering a healthy corporate culture, and showing concern for your staff.
Edmans, A. 2011. The Link Between Job Satisfaction and Firm Value, With Implications for Corporate Social Responsibility. Academy of Management Perspectives.Working paper: 203-217.