Companies offering a better employee experience outperformed other companies in their sector by a margin of 2 to 4 percentage points in top-line growth, bottom-line profitability and return to shareholders, a study released Monday found.
The study, by Willis Towers Watson, is based on a survey of more than 500 companies and an analysis of the company's database of 250 million employees. It found that companies demonstrating a strong employee experience did better than other companies by 1 to 10 percentage points on their return on assets and equity, one-year change in profitability, and three-year changes in revenue and profitability.
“We found the highest performing companies have a very strong focus on how their employees feel about the organization, from inspired by its purpose and trust in leadership,” said Patrick Kulesa, senior research director at Willis Towers Watson Research and Innovation Center.
What makes employee experience unique in the high-performance group, the company found, are key aspects reflecting the mindset of employees, such as feeling inspired by the company’s mission and purpose; being able to achieve one’s potential and career aspirations; having a deep sense of trust in senior leadership; and having a sense of drive through strong customer focus, and innovation and agility in meeting marketplace demands.
“Many of these workplace essentials occupy immense time and resources in organizations today," Kulesa said. "What our model says is these table-stakes are not unimportant but can distract employers from the true hallmarks of excellence. Our model directs employers to the specific factors of employee expereince, which are the most important for predicting sustained financial performance."
“We have definitive evidence that better employee experience correlates to better performance for three-year revenue growth, three-year improvement in profit margins, return on equity, and return on assets,” Kulesa told CFO Dive Monday. “So there is a demonstrated financial return here, across your business. The better you [support] your people, the better your financial performance.
“If you scratch below the surface of what we mean by [employee] experience, you see that some things we’re tapping into include organization, efficiency, and the ability to provide support and cost effectiveness,” Kulesa said. “These are the things we’re asking people about: the tangible feel for what we’re doing everyday, and the direct cost implications behind that.”
Kulesa doesn’t deny that these kinds of changes have a price. “These are business investments that have to be juggled with other business investments,” he said. “But when this is more effective, performance, broadly, is better, too. The kinds of investments we’re making from a business standpoint are performance drivers. What the company’s doing to invest and drive experience drives how people work, and what they do every day, and that has an impact on the bottom line.”
“The CFO, as someone at the table when you’re talking about investment decisions, has an interesting opportunity,” Kulesa said, explaining how the finance team can help impart this positive change. “[The CFO can say] we have a wide range of priorities within our organization that have cost implications, but we have to understand that our employees’ experience drives our financial performance, and a lot of their experiences are connected to financial considerations.”
Kulesa urges CFOs and other finance executives to take a broader view of their employee investment decisions. “All decisions are going to have a downstream consequence for their business,” he said. “We have to optimize our own financial performance. [This study] arms the CFO with some data around the financial impact of people and having that available at the table. Those investment decisions coming up should arm them with some good knowledge.”