Happy Employees Can Mean Higher Stock Prices

Disclaimer: This post does not constitute financial advice. Author has no position in any companies mentioned in this post. Do your own due diligence before making an investment.

Numbers are everything. That’s what we’re told every day at work, home, and in the media. In the movie Moneyball, they realize player statistics are more important than any other factor in picking a winning baseball team. Instead of judging them based on their history or sportsmanship, they solely judged them based on statistics. It worked. Now, baseball, as well as other sports, use statistical measurements in deciding who is worth putting on your team. But, if you’re investing in businesses, it’s a bit more complicated.

Every year, Glassdoor ranks the best places to work based on employee happiness. Every year, for the past 12 years, these businesses have always at least doubled the S&P 500 returns. There are many theories on why this is. Is it causation, correlation, or a bit of both?

These top performing companies include Facebook (FB), Lululemon (LULU), Nvidia (NVDA), Google (GOOG), Microsoft (MSFT), Hubspot (HUBS), and Delta Air Lines (DAL), among many others. These successful companies all performed well based on employee happiness. Let’s discuss why this could be a good indicator for investment.

Employee satisfaction is an interesting measure for a successful company. Some business owners think their employees should be exploited to the fullest to get the best margins possible. However, this doesn’t always produce the best results. This study shows companies that care about their employees may put the same amount of effort into the rest of their business. If they’re cutting corners with salaries, company culture, and management training, they could also be cutting corners with their product. This would indicate a correlation in the business doing well when their employees are happy.

A direct causation would be: happier workers produce better results. This is also a possibility, as good employees will flock to where they feel the most valued. If an employee feels respected, appreciated, like their work is meaningful, and like their leadership is trustworthy, they will produce the best work they’re able to. Many businesses will assume a worker will become complacent with a high salary and comfortable schedule, but this has been proven false. The businesses with the best work culture produce results higher than the market average.

Some would argue these employees say they’re happy because of their high salaries. However, salary is only one of six aspects of employee happiness. The others are working with good people, having a sense of purpose, having stimulating work, having a promise of advancement, and feeling confident in the senior leaders. Perks such as a good salary, free food, and drinks are only one aspect. Many people who make tons of money hate their workplace, because they only get one out of six perks. Therefore, it can’t be measured in just numbers, because you can’t measure happiness in numbers. We don’t live in Moneyball.

It becomes a bit of a chicken and egg situation then, doesn’t it? Is the business successful because the employees are happy and made the business succeed from their hard work? Or, are the employees happy because the business is so committed to being successful in every way, so it dedicates itself fully to both its profits and employees. But, would the business even be so successful in the first place if it didn’t have such happy employees?

All these questions lead to one answer. Company culture and employee satisfaction is often a great indicator of how well a company will do financially. So, next time you’re looking for a new investment, consider the companies that keep their employees happy. Check out the full list from Glassdoor or see the top 10 below.