Tags: employee | shareholders | satisfaction | labor

Study: Happy Workers Create Happy Shareholders

By    |   Tuesday, 30 September 2014 02:07 PM

Employees who are happy at work produce higher stock returns for their companies, according to a new study of 14 countries with a variety of regulatory environments that had lists of the best companies to work for published by the Social Science Resource Network.

However, that finding only holds in countries with flexible labor policies, such as the United States and the United Kingdom, not so much in countries with restrictive hiring and firing rules, such as Germany.

High employee satisfaction is a valuable tool for recruiting and motivating employees in flexible labor markets, concludes the paper titled, "Employee Satisfaction, Labor Market Flexibility and Stock Returns Around the World."

"In contrast, in regulated labor markets, legislation already provides minimum standards for worker welfare and so additional expenditure may exhibit diminishing returns," the researchers write.

"Turning to investors, a strategy of investing in firms with high employee satisfaction will only generate superior returns in countries with high labor market flexibility."

In countries with more extensive labor rules, companies promoting greater employee satisfaction have less to gain since workers already feel fairly treated and have more job security.

"The benefit of employee satisfaction is lower if you are less likely to recruit to begin with," study co-author Alex Edmans tells Knowledge@Wharton, the school's online journal.


Employee satisfaction is more important in today's high-tech, service-orientated business world. In the past, companies typically held most of their assets in physical capital, but now their key assets are often their workers, including both the rank and file and senior managers. That's especially true in knowledge-based industries like software, pharmaceuticals and financial services.

"Employee-friendly policies," the paper states, "can attract high-quality workers to a firm and ensure that they remain within the firm, to form a source of sustainable competitive advantage."

Still, the importance of employee satisfaction for the corporate bottom line is controversial. As Knowledge@Wharton notes, some economists have argued that high worker satisfaction indicates they are overpaid and underworked and hurts corporate profits.

"If you’re measuring the effectiveness of your culture by your workforce's 'satisfaction,' you're doing it all wrong," Gallup CEO Jim Clifton advises executives in his blog.

Trying to make workers happy by offering free lattes and more vacation time won't increase efficiency. Instead of worrying about employee satisfaction, managers should strive to engage employees by developing their strengths.

"Human beings are not looking for company-bought goodies — they are looking for meaningful, fulfilling work. It is the new great global dream — to have a good job, not a free lunch."

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Employees who are happy at work produce higher stock returns for their companies, according to a new study of 14 countries with a variety of regulatory environments that had lists of the best companies to work for published by the Social Science Resource Network.
employee, shareholders, satisfaction, labor
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2014-07-30
Tuesday, 30 September 2014 02:07 PM
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