Employee Engagement: What Is It Really Worth?

Transcription

1 Employee Engagement: What Is It Really Worth? Andrew Chamberlain, Ph.D. Chief Economist

2 What do these 5 companies have in common?

3 3

4 Management is focused on consumers and employees to the detriment of shareholders. To me, why would I want to buy a stock like that? -Jeff Tryka, analyst at Delafield Hambrecht

5 Is boosting employee satisfaction worth the investment?

6 Today, I want to leave you with one big idea.

7 Employee satisfaction is causally linked to financial profitability.

8 Key questions 1. Why should we believe crowd-sourced data on employee satisfaction? 2. What does research say about employee satisfaction and financial performance? 3. What are key drivers of employee satisfaction? (It s not what you think.)

9 Why should we believe crowd-sourced data on employee satisfaction?

10 How much does this ox weigh?

11

12 What weighing cows teaches us about data Together we know a lot. Errors tend to cancel out in aggregate. Economists call it the central limit theorem. Crowd sourced platforms provide powerful insights.

13 Wisdom of crowds in Glassdoor data

14 Wisdom of crowds in Glassdoor data

15 Wisdom of crowds in Glassdoor data

16 How does employee satisfaction impact financial performance of companies?

17 Let s look at the research

18 Glassdoor knows a lot about employee satisfaction 34M registered users 10M reviews 445K companies 190 countries Glassdoor internal data, Sept 2015

19 Problem: How can we untangle causality between employee satisfaction and financial performance?

20 Solution: We use econometrics.

21 Study Number One Source: Huang, Minjie et al. (2015). Family Firms, Employee Satisfaction, and Corporate Performance, Journal of Corporate Finance, Vol. 34, pp Link:

22 Findings Employee satisfaction has a causal and statistically significant effect on company value. Source: Journal of Corporate Finance, 2015

23 Findings Is this big enough to matter? Boosting employee satisfaction by one star raises the market value of a company by (0.141 / 1.790) = 7.9% And this has a causal interpretation, not just a correlation. Source: Journal of Corporate Finance, 2015

24 Study Number Two Glassdoor s Best Places to Work list (from crowd-sourced reviews). Compares stock performance of highly rated companies to the S&P 500. And of poorly rated companies as a control group. Looks for upward jumps in stock prices following Best Places to Work announcement. Source: Chamberlain, Andrew (2015). Does Company Culture Pay Off? Analyzing Stock Performance of Best Places to Work Companies, Glassdoor Economic Research working paper. Link:

25 Findings Glassdoor s Best Places to Work list outperformed the S&P by 115.6% Source: Glassdoor Economic Research, 2015

26 Findings Companies with dissatisfied employees dramatically underperform the stock market. Source: Glassdoor Economic Research, 2015

27 Findings Event study: Stock markets are already pricing signals of employee satisfaction into stock returns. Winner Announcement Source: Glassdoor Economic Research, 2015

28 Study Number Three Source: Edmans, Alex (2011). Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices, Journal of Financial Economics, Vol. 101, Issue 3, pp Link:

29 Findings Companies with satisfied employees generate significant excess stock returns. (0.29% per month or 3.5% annual boost in stock returns) Source: Journal of Financial Economics, 2011

30 What are the key drivers of employee satisfaction?

31 Factors driving employee satisfaction We used Glassdoor data to ask, Does money buy happiness? 221,000 users that contributed both a company review and salary report. We identified which factors most affect workplace satisfaction. Source: Glassdoor Economic Research, 2015

32 Findings: Salary is not the main driver of satisfaction Source: Glassdoor Economic Research, 2015

33 Culture, opportunities and leadership matter most Source: Glassdoor Economic Research, 2015

34 Lessons for leaders Compensation matters. But other factors are far more important for employee satisfaction.

35 What have we learned today?

36 Don t dismiss crowd-sourced data on employee satisfaction

37 Research clearly shows satisfied employees drive financial returns.

38 Good culture & values matter more than pay for employee satisfaction.

39 Thank you!

40 Questions? Please reach glassdoor.com/research Andrew Chamberlain, Ph.D. Chief Economist