Treating Employees Well Led to Higher Stock Prices During the Pandemic

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Every organization has struggled in some way over the past 12 months. But there is one factor – irrespective of a company’s size or sector – that is helping determine whether they are thriving or just surviving in the face of Covid.

We know anecdotally – and instinctively – that companies with a good workplace culture must be better equipped to deal with a global shutdown that has forced millions of people to adapt to radically new ways of working. Employees needed clear, consistent and caring leadership more than ever and companies are likely to see the benefit as more people flock to work there and are more productive when they start each morning.

The question is how can we measure the impact of this good culture on a company’s financial performance?

To test the idea, we looked at company rankings compiled by Great Place to Work, the global authority on workplace culture which puts together the annual Fortune 100 Best Companies to Work For®, and alongside it created a hypothetical index using data from FTSE Russell, the global index and data provider.

We had a hunch there would be a correlation but the result was clearer than we ever imagined. Our new “100 Best index” outperformed the broader market by 16.5% in 2020, returning 37.4% compared to a 20.9% return for the Russell 3000® Index – the broadest benchmark index for US stocks.

The 2020 performance bump mirrors a long-term trend of similar outperformance – the 100 Best index has had a cumulative return of 1,709% since 1998, as compared to a 526% return for the Russell 3000 Index for the same time period.

Behind the numbers: hard data and human insights

The 100 Best index combines the time-tested and well-respected methodology of two global leaders in their respective fields. FTSE Russell refreshes its hypothetical index each year on January 1 with the “100 Best” list of publicly traded US companies the previous year, while equally weighting the index across companies to ensure even representation.

Great Place to Work compiles its 100 Best Companies to Work For list through America’s largest ongoing annual workforce study, which draws on Great Place to Work’s 30 years researching workplace culture globally.

The 60-question survey is designed to measure companies on various factors, including employees’ ability to reach their full human potential, how employees experience company values, their ability to contribute ideas and their perception of company leader effectiveness.

Most remarkably, in 2020, the 100 Best broke records on measures of leadership credibility. Employees scored their leader’s trustworthiness the highest ever in Great Place to Work’s 33-year history of studying company culture.

Under the most challenging conditions of COVID-19 and racial injustice, overall employee experience scores improved compared to 2019 thanks to great supervisors, mid-level managers and executives.

“The ability to perform work from home is not the common denominator among this year’s 100 Best Companies,” said Michael C. Bush, CEO of Great Place to Work. “Instead, they shared a widespread faith in leaders committed to making things better for people – ALL people.”

“What inspires better employee engagement is when no matter who a person is, what pronoun they use (or don’t) or what they do for the company, all of these employees trust their leaders. Secondly, they feel their work positively impacts their customers and the broader social and physical environment,” said Michael.

The value of company culture based on positive employee experience

A wealth of research supports the notion that successful companies are propelled forward by happy employees. Company culture rooted in trust, transparency and caring helps give people clarity and a sense of purpose leading to higher employee engagement, better customer service, greater innovation and strong business results.

While company stock performance cannot be linked solely to company culture, the recent and long-term performance of the 100 Best index relative to the broad index begs a number of questions and certainly advances the argument for making workplace culture a central part of any organizational strategy.

The impressive relative long-term performance for the 100 Best index since 1998 suggests that employer branding and company culture, as experienced internally by employees and externally by investors, can make a substantial difference in company stock performance over time.

In addition, the significant outperformance by the 100 Best in 2020, as the world faced a year of lockdowns and struggled with the impact of the global pandemic, suggests that companies that have treated their employees well historically tend to fare well during difficult times.

In fact, we observed a similar trend during the global financial crisis of 2008-2009, when the 100 Best index outperformed the Russell 3000 Index.

A fair, caring and supportive culture strengthens businesses because employees feel trusted and empowered to do their best work, whatever the external factors may be. While this is a lesson companies should certainly implement for the bad times, it will be just as valuable in the good days to come.

Create a company culture that is better for business

Time and time again, the data shows us how treating employees well is better for all stakeholders. Reach out to us about how we can help you create a culture that puts you ahead of other organizations.

Source: FTSE Russell and Great Place to Work®, as of April 12, 2021. Returns shown are hypothetical and for analysis purposes only. Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. Back-tested performance is not actual performance, but is hypothetical. Please see the end for important disclosures.

Great Place To Work identifies Best Workplaces™ in Asia by surveying over 1 million employees in Asia and the Middle East about the key factors that create great workplaces for all and analyzing company workplace programs impacting over 4.7 million employees in the region.

To be considered, companies must first be identified as outstanding in their local region by appearing on one or more of our Best Workplaces lists in Greater China (including China, Hong Kong and Taiwan), India, Indonesia, Japan, Kuwait, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, UAE, Vietnam during 2021 or early 2022.

Companies rank in three size categories: Small and Medium (10-499 employees); Large (500+); and Multinational. Multinational organizations are also assessed on their efforts to create great workplaces across multiple countries in the region. They must appear on at least two national lists in Asia and the Middle East and have at least 1,000 employees worldwide with at least 40% (or 5,000) of those employees located outside the headquarters country.

Great Place To Work identifies Best Workplaces in Asia™ by surveying 2.1 million employees in Asia and the Middle East about the key factors that create great workplaces for all and analyzing company workplace programs impacting 5.9 million employees in the region.

To be considered, companies must first be identified as outstanding in their local region by appearing on one or more of our Best Workplaces lists in Bahrain, Greater China (including China, Hong Kong and Taiwan), India, Indonesia, Japan, Kuwait, Oman, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, UAE, Vietnam during 2022 or early 2023.

Companies rank in three size categories: Small and Medium (10-499 employees); Large (500+); and Multinational. Multinational organizations are also assessed on their efforts to create great workplaces across multiple countries in the region. They must appear on at least two national lists in Asia and the Middle East and have at least 1,000 employees worldwide with at least 40% (or 5,000+) of those employees located outside the headquarters country.

For All™ Methodology

Great Place To Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2023 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 450,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

For All™ Methodology

Great Place to Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2022 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 130,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

Categories:
These organizations’ assessment is based 100% on employee responses to the Trust Index survey.

  • Small 10-99 Employees

For larger organizations with more than 100 employees, we also use our Culture Audit™ tool, asking organizations to share with us their practices, policies, and programs to create a great workplace For All™ and evaluate the approach they take.

  • Medium 100-999 Employees
  • Large 1000+ Employees

Why do you say in one place your national list scoring is based on 85%/15% and in another place that it is 75%/25%?

We are explaining two different things:
1.  The criteria we evaluate

  •  85% concerned with Trust and Maximizing Human Potential and
  • 15% concerned with everything else

2.  Where the data comes from

  • 100% Trust Index for organizations with less than 100 employees
  • 75% based on the Trust Index survey analytics and 25% based on responses to the Culture Audit for organizations with more than 100 employees.
For All™ Methodology

Great Place To Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2023 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 450,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

Categories:
These organizations’ assessment is based 100% on employee responses to the Trust Index survey.

  • Small 10-99 Employees

For larger organizations with more than 100 employees, we also use our Culture Audit™ tool, asking organizations to share with us their practices, policies, and programs to create a great workplace For All™ and evaluate the approach they take.

  • Medium 100-999 Employees
  • Large 1000+ Employees