Companies that make the Fortune 100 Best Companies to Work For list compiled by Great Place to Work consistently outperform the market by a factor of 3.36, according to the global index and data provider FTSE Russell. Analyzing 25 years of market data about the annual returns of the publicly traded companies on the list and comparing those results to other market benchmarks, FTSE Russell found that an investment in those 100 Best companies would yield a return more than triple what a similar investment might have earned in another portfolio.
This research offers a compelling case for considering the employee experience in an investment strategy. What metrics can investors use to understand whether a company has thriving employees? Companies that routinely make the 100 Best list have some common characteristics that set them apart from other organizations.
Employee retention
Most companies on the 100 Best list have significantly less turnover than their industry peers. Retention is an important indicator of future company performance, because when employees leave they take their relationships, institutional knowledge, and future contributions with them.
Employees’ psychological and emotional health
Employees on the 100 Best list overwhelmingly report having healthy workplaces. When a company doesn’t have a healthy work environment, its innovation and productivity suffer. Because psychological safety (how employees feel about taking risks in the workplace) is key for an innovation culture, investors might want to consider how a company is creating a workplace in which employees can generate new ideas, develop new skills, and push themselves to new levels of performance.
Companies on the 100 Best list invest in their workers’ health through a variety of initiatives, such as offering maximum flexibility, ensuring that employees use their PTO, and investing in mental health resources. With less than half of U.S. workers taking all of their available paid time off, investors may see a potential competitive advantage in companies that give their employees space to thrive outside of work.
Discretionary effort
Revenue-per-employee (a key metric that many investors scrutinize) doubled for companies on the 100 Best list. Performance matters—but how companies get a performance bump also matters. The companies on the list have found ways to get more from their workers by investing in their growth and development—then reaping the rewards when those employees give extra effort at their jobs.
Talk to the employees!
When evaluating the health of a company, it’s crucial to get employees’ perspectives. Are workers genuinely invested in the company’s mission and bringing their full set of unique gifts to bear on behalf of their organization? Or are those productivity numbers just smoke and mirrors that mask a deeply unhealthy culture in which employees cut corners, fudge the numbers, and fail to report errors for fear of retaliation? Listening to employees can help investors obtain even more data on a company’s health and performance.