Want to Outperform the S&P Index? You Need Truly Engaged Employees

Creating a work environment in which employees choose to engage directly impacts the bottom line. Companies who treat employees well have returns at least 4 percent better than the S&P Index, year after year.

That’s a bold statement to make, yet the results are proven directly in the U.S. stock markets. Companies in the Parnassus Workforce Fund (as explained in this Fast Company article) include many of the “100 Best Companies To Work For” as well as others that “genuinely cared about their employees as people, not just hired hands.”

The results are indisputable In eight years, the fund has had a 9.63 percent annualized return (as compared to the S&P Index earnings of 5.58 percent in the same period).

A contented workplace helps during tough times

Moreover, the story noted:

Another compelling statistic buried in the Parnassus prospectus: Over the past five years — the height of the Great Recession — the average annual return on the Workplace Fund was an incredible 10.81 percent. The S&P Index for the same period was just 3.97 percent, a 6.84 percent difference.

[James] Dodson, [founder of Parnassus Investments and portfolio manager of the Parnassus Workplace Fund], believes the wide gap in performance is easily explained: ‘I think what happens when you have a contented workplace, people are willing to put out more effort to improve operations during really difficult times. While I think every organization has their ups and downs, the downs are not as pronounced because everybody pulls together to try to get through the crisis. And, of course, this consistently more engaged performance inevitably reveals itself in the firm’s bottom line.’ ”

3 ways to REALLY engage employees

Employee engagement matters. Caring about employees as people and not just human resources makes a tremendous difference to organization success. What can you do?

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  1. Give them something to believe in and strive for. Make your mission and values more than just a statement. Make them integral to what every employee does every day in their own, unique, job roles and functions.
  2. Recognize and reward them for significant accomplishments and behaviors. Help employees understand when and how they personally contribute to achieving the mission while living the values by recognizing and rewarding them for doing so – frequently and in a timely way.
  3. Empower them to be the caretakers of your culture. Show you trust employees by encouraging them to also recognize and reward peers and colleagues when they see others living the values and achieving the mission. The culture must be owned by all to be relevant and real to everyone.

Do you believe in the power of employee engagement to drive bottom-line results?

You can find more from Derek Irvine on his Recognize This! blog.

Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their company culture. As the Vice President of Client Strategy and Consulting at Globoforce, Derek helps clients — including some of world’s most admired companies such as Proctor and Gamble, Intuit, KPMG, and Thomson Reuters — leverage recognition strategies and best practices to better manage company culture, elevate employee engagement, increase retention, and improve the bottom line. He's also a renowned speaker and co-author of Winning with a Culture of Recognition. Contact him at irvine@globoforce.com.

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1 Comment on “Want to Outperform the S&P Index? You Need Truly Engaged Employees

  1. From reading the Fast Company article, it seems that there might be a correlation between employee happiness and financial performance. Of course, it’s entirely plausible that this is because a company has some capacity X which, as a side effect, generates both high employee morale and excellent profitability. Which would make your claim that investing in employee morale makes you more financially competitive incorrect. Parnassus’ methodology, as presented, is insufficient to draw the conclusion that you have presented here.

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