è淚f you do really care about financial performance, then youè檇 want to care about the biggest driver of financial performance è� which is your human capital.è�
~ Dr Alex Edmans, Professor of Finance
The employee experience is one of the strongest predictors of long-term business results.
Dr Alex Edmans, a renowned Professor of Finance and keynote speaker on several TED stages, recently conducted a study to investigate the financial benefits of great company culture by measuring the performance of UKè檚 Best Workplace鈩� organisations in comparison to other companies.
In this 2024 study, Dr Edmans created a hypothetical stock portfolio of UK-based, publicly traded companies from the Best 天美影院鈩� Lists; exploring the returns of this è楤est 天美影院 portfolioè� vs. FTSE All-Share Index over a 23-year period, from 2001 to 2023.
Dr Edmans acknowledges that while stock price is not the only measure of performance, conducting this type of study allows one to control for many other factors è� such as controlling for risk.
The results show that:
If you had started a stock portfolio of the UKè檚 Best 天美影院鈩� in 2001, with an investment of just 拢100, you would have seen more than 4-times the returns of a similar investment in the FTSE All-Share.
According to Dr Edmans, these results, combined with his , è減rovide suggestive evidence that being a Great Place to Work is associated with higher firm valueè� and, because this firm value is not immediately incorporated into the stock market, it may be a è減articularly relevant investment criterion for shareholdersè�.
In fact, a value-weighted (equal-weighted) portfolio of the publicly traded companies on the list generated returns of 1,047% and 894% respectively, compared to 231% for the FTSE All-Share index.
For example, if you started in 2001 and held the FTSE All-Share Index with 拢100, then over the 23-year period this would have grown to 拢330 reinvesting dividends.
But if you bought the UKè檚 Best 天美影院, and then every time a new list came out you would refresh that list over the same period, then you would get 拢993.51. That is what's known as an equal weighted portfolio è� investing in all of the Best 天美影院 equally.
However, some people might think this means you may be disproportionately investing in some smaller companies, and that might be a hard strategy to do. So instead, what you could do is evaluate it where you invest more in the larger companies (i.e. value weighted portfolio), which would give you an even higher return of 拢1,146.87.
There are therefore big differences between investing in the Best Workplace portfolios and just holding the market. And this is strong evidence that treating your workers well absolutely pays off.
The cumulative result: Companies with high-trust cultures are more profitable and have higher stock market returns.
With increasing pressure on business leaders to innovate and grow the bottom line, HR leaders need to make the case for what this data proves: great company culture is a key predictor of financial success.
Here are four ways great culture drives profit:
According to the British Red Cross, UK employers are losing around 拢45 billion a year due to poor mental health, while Health and Safety Executive data shows a loss of 17 million working days due to employeesè� work-related stress, depression and anxiety.
When asked by Great Place To Work, around 1 in 3 employees (36%) at a typical UK company say they è渙ften think about looking for a job at another organisationè�.
High turnover can be incredibly expensive. Itè檚 estimated that UK employers will need to spend, on average, 拢3,800.00 to replace a single employee working on an hourly wage of 拢11.44.
Take the retail and hospitality sector, for example: these employers are currently faced with a 31% staff turnover rate, according to CIPD and Great Place To Work studies. This means that a large-sized organisation in this sector, such as a hotel or supermarket chain, with 10,000 employees would need to pay a staggering 拢11.78 million to fill the gaps.
By contrast, an impressive 85% of employees working at the UKè檚 Best 天美影院 in 2024 agree that è淧eople look forward to coming to work hereè� and say that they want to stay at their organisation è渇or a long timeè�.
As humans, our feelings can greatly influence how we think, which, in turn, determines how we behave.
In the context of work, how employees behave (influenced significantly by their relationships with managers and colleagues) will largely determine how successful their organisation will become.
Employees who have a consistently positive work experience are proven to be more motivated, more productive, and more likely to stay with the organisation.
At the UKè檚 Best 天美影院, 84% of employees agree that their company è渋s a psychologically and emotionally healthy place to workè� è� compared to the UK average of just 58%.
From the business perspective, when people feel psychologically safe in the organisation è� by being free to share ideas, questions, concerns è� the company is more agile. Whereas a lack of psychological safety can thwart new projects, processes, and procedures if colleagues question their every move, or avoid asking for help for fear of being criticised; accused of not keeping pace; or worse, being made redundant because of new, è榖etterè� initiatives.
But beyond encouraging people to speak up, psychological safety as a benefit of great company culture also involves how an employer views work-life balance. At the Best 天美影院, leaders are making employees feel safe so they can focus on work without fear for their own survival.
The result: the company benefits from having employees who actually care about the success of the organisation. And, in turn, perform the desired behaviours that drive the business forward.
When employees trust their employer, they work harder, contribute more, and drive higher levels of innovation and productivity.
the U.S. found that the highest levels of innovation occur when every employee is empowered to participate è� and for companies where higher numbers of workers report innovation and inclusion, median year-on-year revenue growth is more than five times higher than firms in the bottom quartile for connecting employees to innovation.
Rather than looking solely to the C-suite for useful ideas, the UKè檚 Best 天美影院 create multiple opportunities for all employees to innovate è� whether it be improving products, creating more efficient workflows, or delivering better customer service.
As a result, 86% of employees at these top-performing companies agree that è渕anagement genuinely seeks and responds to peopleè檚 suggestions and ideasè� è� 30% more than the UK average.
These employers are acutely aware of the value that consistent feedback loops have on their people proposition; seeking colleaguesè� ideas and concerns regularly throughout the year è� and then taking action quickly based on those insights.
Trials or projects that fail on the first attempt are often given a second chance, but with adjustments that transmute the norm or generalised approach into something bespoke that meets the needs of both employee and employer.
Itè檚 a cycle which enables Best 天美影院 to be culture champions who outplay competitors; fine-tuning policies and practices regularly, and making incremental changes at key points that concurrently improve business performance and job satisfaction.
Worried about productivity? Employees who are burned out may be quiet quitting rather than helping you reach crucial business goals. Or they might be actively seeking their next job.
Our analysis of over 140,000 anonymous UK-based employee survey responses found that flexibility, autonomy and work-life balance remain among the top priorities for UK employees.
è淎 great job is a vital component of a great life,è� says Sara Silvonen, Wellbeing Lead and Senior Consultant at Great Place To Work UK. è淕lobally, weè檙e seeing workers feeling increasingly isolated, alongside a decline in their psychological, emotional, and financial wellbeing.
Many suffer behind the scenes, continuing to perform well without outwardly showing signs of stress. But keeping up the fa莽ade poses significant health risks for individuals è� burnout in the worst case è� and should be a real cause for concern among business leaders.
Risks directly impacting the bottom line include unexpected turnover, productivity loss, disruptions to team dynamics, reduced innovation, and increased costs for long-term medical support.è�
Employers who put in place measures that help individuals defend against chronic stress and burnout è� and who enable colleagues to achieve and maintain work-life balance è� will ensure their people, and the company they work for, can thrive.
This was a quote shared by a delegate at a recent For All鈩� Community conference in London, where people leaders and colleagues from Certified鈩� è榞reatè� workplaces were given an exclusive preview of Dr Edmansè� latest research findings.
Leaders at these organisations can speak to what the study shows: Profits donè檛 create great workplaces. Itè檚 the other way around.
Ultimately, when you invest in workplace culture è� by genuinely putting your people first, and ensuring a consistently great employee experience for all è� your business will be more profitable.
It really is that simple.
Compare the experiences of your employees with the most credible benchmark data available. Learn more about how to earn Great Place To Work 天美影院鈩�.