For the first time in the UK, a groundbreaking study found that employee satisfaction impacts how well organisations perform financially. Researchers discovered that employee satisfaction – in the form of higher Glassdoor company ratings – improves a company’s bottom line.
Having a one star higher rating on Glassdoor is related to almost 1% higher annual return on company assets; and public companies experienced extra stock portfolio returns of up to 16% per annum, research revealed.
The study, led by the University of East Anglia’s Norwich Business School, is the first to examine the link between Glassdoor ratings and company financial performance in the UK. It analysed 35,231 current employee ratings from Glassdoor for 164 large UK companies between 2014-2017.
“The findings are important for several reasons to both managers and investors,” said Dr. George Daskalakis, Finance Lecturer and Report Co-Author at Norwich Business School. “It clearly suggests that companies should invest in their people and employee satisfaction by focusing on motivating, inspiring, rewarding and retaining their workforce. From an investment point of view, it shows that online employee reviews can be used to forecast the financial results of UK firms.”
Daskalakis added that the research was conducted during a period of turmoil and uncertainty in the UK labour market due to Brexit, which reinforces the fact that even in tough times, employee satisfaction can be a significant competitive advantage.
[Related: 60 HR & Recruiting Statistics for 2018]
Real-Time ‘Stock Tips’
You might think that the stock market has always assumed companies with satisfied employees perform better, and in turn are good places to invest, right? Not quite. The study suggests that investors still don’t fully appreciate the proven link between satisfied employees and business outcomes when valuing stocks.
“Our study found that when you invest in companies with high ratings on Glassdoor, you earn superior returns,” Daskalakis said. “Though it’s to their advantage to do so, most investors are not looking at employee satisfaction when assessing and valuing stocks.”
The study looked at the return of a stock portfolio for the top 25% rated companies in the UK Glassdoor sample. After accounting for risk, researchers found that over a four-year period, the portfolio earned between 10% and 16% extra annually, according to standard asset pricing models.
Daskalakis noted that Glassdoor is a particularly valuable tool for investors because employee ratings and reviews function as ‘real-time data’ that can be readily accessed when evaluating a company’s overall health. And indeed, more and more investors are turning to Glassdoor for insights when choosing which companies to invest in.
[Related: Employee Engagement Checklist & Calendar]
How to Boost Employee Satisfaction
You may be wondering, how can my organisation improve employee satisfaction and reap the financial rewards? Surprisingly, it has less to do with pay rises than you might think.
Glassdoor’s Chief Economist, Dr Andrew Chamberlain, conducted a study which asked the question: Does Money Buy Happiness? The data from a sample of 221,000 Glassdoor users suggests that it does not. It turns out people are more driven by culture & values, senior leadership and clear career paths than they are by compensation. Chamberlain’s advice to HR department heads is to advocate for programmes that truly drive employee satisfaction.
[Related: Employee Satisfaction Surveys]
Programmes that build employee satisfaction:
1. Healthy culture: Company culture is an organisation’s personality shaped by a variety of traits, including work environment, mission, values, goals, employees and leadership. It isn’t as simple as a cake on an employee’s birthday. Importantly, the values that define your culture must be clearly communicated to employees who are then able to align with them. If your culture is not well defined or problematic, it’s important to understand where problems lie by asking for honest and perhaps anonymous employee feedback. Then put a plan and budget in place to address concerns and right wrongs that are causing attrition or morale issues.
2. Clear career paths: No one likes feeling stuck. Employees who have a clearly defined career path will be set up for success, feel more supported by their employers and stay longer. It’s a great idea to put time, energy and resources into mapping out long term goals for employees and helping them grow from within. Also, if an employee comes to you with an idea of something they would like to change or do within the company, helping them pursue it, even if it means changing roles or departments, is key to retention.
3. Senior leadership: Leaders are often the drivers of company culture, so it’s important that they positively represent your culture and values. Also, if employees don’t respect leadership, the above two workplace attributes are likely to suffer, along with many others. If your organisation is having trouble with certain leaders or finding that employees do not embrace the same goals or methods, it could be time to invest in leadership training, or make executive changes.