Real, tangible, quantitative data confirms that happy and engaged employees lead to greater profits and higher stock prices. Alex Edmans, PhD (MIT) and Professor of Finance at the London Business School published an interesting study that assessed stock performance for the Fortune “100 Best Companies to Work For in America” cohort over the course of 27 years.
The results published in the Academy of Management Journal show a correlation between companies with happy, satisfied employees and an up to 3.8% increase in stock price compared to peers. This is HUGE! For some companies, a fraction of a percent increase in stock price equates to $100’s of millions of dollars. Edmans’ and other studies validate that investing in employee happiness and job satisfaction is not only the right thing to do, but also a smart financial move leading to profitability. The ROI for employee engagement is the real deal.
Companies listed in the “100 Best Companies to Work For in America” generated 2.3% to 3.8% higher stock returns per year than their peers from 1984 through 2011.
Through our own secondary research* on the ROI of employee engagement, we’ve also discovered that happy employees equate to higher levels of productivity, employee retention, and better customer service. Most importantly, employee engagement boosts the bottom line:
- Happy employees are 85% more efficient
- Happy employees are 55% more effective
- Happy employees deliver 42% better customer service
- Happy employees stick around 2x longer than unhappy employees
So, what are some great ideas for engaging employees? How can you do a better job applying best people practices to recruiting, retaining, motivating, and recognizing your people to achieve greatness and company profits? Check out our analysis of 7 ideas for employee recognition, employee rewards and employee engagement. In addition to a summary of each engagement idea, we’ve created a decision matrix that sorts the ideas based on level of difficulty and long-term vs. short-term impact on employee engagement efforts.
Sources: Academy of Management Journal http://amp.aom.org/content/26/4/1.abstract; Conference Board Survey, 2010; Gallup Management Journal, 5/07); Learned Optimism, Seligman, 1991; Deloitte Study, 6/12; Happiness Advantage, Achor, 2010