Emplo loyee E Eng ngageme ment nt: : Wha hat Is Is It It R Really W lly Worth? h? Andrew Chamberlain, Ph.D. Chief Economist #Glassdoor
What do these 5 companies have in common? #Glassdoor
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“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 #Glassdoor
Is boosting employee satisfaction worth the investment? #Glassdoor
Today, I want to leave you with one big idea. #Glassdoor
Employee satisfaction is causally linked to financial profitability. #Glassdoor
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.) #Glassdoor
Why should we believe crowd-sourced data on employee satisfaction? #Glassdoor
How much does this ox weigh? #Glassdoor
#Glassdoor
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. #Glassdoor
“Wisdom of crowds” in Glassdoor data #Glassdoor
“Wisdom of crowds” in Glassdoor data #Glassdoor
“Wisdom of crowds” in Glassdoor data #Glassdoor
How does employee satisfaction impact financial performance of companies? #Glassdoor
Let’s look at the research #Glassdoor
Glassdoor knows a lot about employee satisfaction 10M 445K 190 34M registered users reviews companies countries Glassdoor internal data, Sept 2015
Problem: How can we untangle causality between employee satisfaction and financial performance? #Glassdoor
Solution: We use econometrics. #Glassdoor
Study Number One Source: Huang, Minjie et al. (2015). “Family Firms, Employee Satisfaction, and Corporate Performance,” Journal of Corporate Finance, Vol. 34, pp. 108-127. Link: http://www.sciencedirect.com/science/article/pii/S0929119915000929 #Glassdoor
Findings Employee satisfaction has a causal and statistically significant effect on company value. Source: Journal of Corporate Finance, 2015 #Glassdoor
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 #Glassdoor
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: https://research-content.glassdoor.com/app/uploads/sites/2/2015/05/GD_Report_1.pdf #Glassdoor
Findings Glassdoor’s “Best Places to Work” list outperformed the S&P by 115.6 % Source: Glassdoor Economic Research, 2015 #Glassdoor
Findings Companies with dissatisfied employees dramatically underperform the stock market. Source: Glassdoor Economic Research, 2015 #Glassdoor
Findings Event study: Stock markets Winner Announcement are already pricing signals of employee satisfaction into stock returns. Source: Glassdoor Economic Research, 2015 #Glassdoor
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. 621-640. Link: http://www.sciencedirect.com/science/article/pii/S0304405X11000869 #Glassdoor
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 #Glassdoor
What are the key drivers of employee satisfaction? #Glassdoor
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 #Glassdoor
Findings: Salary is not the main driver of satisfaction Source: Glassdoor Economic Research, 2015 #Glassdoor
Culture , opportunities and leadership matter most Source: Glassdoor Economic Research, 2015 #Glassdoor
Lessons for leaders Compensation matters. But other factors are far more important for employee satisfaction. #Glassdoor
What have we learned today? #Glassdoor
Don’t dismiss crowd-sourced data on employee satisfaction #Glassdoor
Research clearly shows satisfied employees drive financial returns. #Glassdoor
Good culture & values matter more than pay for employee satisfaction. #Glassdoor
Thank you! #Glassdoor
Questions ns? P Ple lease r reach o h out. . andrew.chamberlain@glassdoor.com @adchamberlain Andrew Chamberlain, Ph.D. Chief Economist glassdoor.com/research #Glassdoor
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