Based on our recent post discussions of valuing employees, the Drucker Institute’s study of “happy employees” is an interesting addition to that body of literature.
(Many readers have heard me relate that Peter Drucker was a mentor during my doctoral studies.) In the Institute’s latest study, it was found that stocks with “higher social values generated higher returns versus the broader S&P 500 over the past month, year, three-year and five-year periods. (Ref WSJ.) In the year-to-date, “social standouts” rendered a 17.4% return versus the S&P ranking at 14.7%. The Drucker Institute uses a “Corporate Effectiveness Index” which they launched in February, 2019 in conjunction with S&P Dow Jones Indices and includes 100 companies with a median market capitalization of approximately $41 billion, across industries. Those selected for the Corporate Effectiveness Index are the best performers over the past six years, with technology stocks comprising 34% of the index make-up including Apple, Microsoft and Alphabet/Google. According to a summary in the WSJ, the Corporate Effectiveness Index evaluates the stock components making up the index by weighting social scores twice as heavily as fundamentals. Those social factors include customer satisfaction, employee engagement (that is, a valuing employee), innovation, and social responsibility. The fundamentals considered were a return on equity, earnings quality and leverage. Therefore, it’s believed by the researchers that company culture might be the most important contributor to a high ranking on the index. As a corollary to this research, a 2018 study by U..K.’s Glassdoor that studied 35,000 employees across 164 employers found that companies with more satisfied employees returned roughly 16% more than companies with less-satisfied employees. As well, a U.S. study conducted from 2009-2015 found that companies across Fortune’s “Best Companies to Work For” outperformed the S&P 500 by over 84 percentage points. So, as we’ve said repeatedly, it’s the company that turns its “average” employees (those who are often citing themselves as “unsatisfied” in these studies) into valuing employees that will be the most successful in the long run. We’ve explained the process in detail in a number of books made available through Change Strategists, including: ALL THE MOVING PARTS: ORGANIZATIONAL CHANGE MANAGEMENT and VALUE PLUS: EMPLOYEES AS VALUERS. It’s the responsibility of a company’s upper level management to ensure that their employees know that they are a strong and important part of the company. The process of forming valuing employees is accomplished by management’s encouraging its employee participation in strategy systems building as well as in the ongoing, daily activities that are arranged to allow the company to meet its goals and new directions. It’s a consistently-proven fact that a valued employee becomes a valuing employee. The approaches that have management ensuring that their employees are valuing employees are effective organizational change management strategies that result in valuing employees who will thrive as employees, go on to become excellent mangers, and who will continue to assure company success and sustainability, day-after-day.