In today's dynamic business landscape, an organization’s success hinges not only on market trends and financial strategies but also on the experiences of its employees. A recent study conducted by Culture Amp’s team of people scientists sheds light on the crucial connection between employee experience and share price performance.
The findings indicate that neglecting the employee experience can have a significant negative impact on an organization's financial standing, emphasizing the need for CEOs and executives to prioritize engagement within their companies.
Why is employee experience so valuable?
Employee experience encompasses the entirety of an employee's journey within an organization, from the moment of onboarding to their eventual departure. It includes the work environment, culture, support, and opportunities provided by the company. This holistic experience significantly influences employee engagement and, as a result, the employee’s productivity and commitment to the organization.
What drives employee experience?
Our comprehensive study examined the engagement survey results of over 500 publicly traded companies between 2017 and 2023, uncovering valuable insights into the relationship between employee experience and share price growth. Two drivers of the employee experience emerged as particularly influential: enablement and recognition.
Enablement refers to providing employees with the necessary information and resources to perform their jobs effectively, while recognition pertains to fair evaluation of job performance. Companies that excelled in these areas demonstrated superior share price growth in the six months after the survey compared to their counterparts.
Enablement and recognition
The study revealed that organizations with high scores on the survey item "The information I need to do my job effectively is readily available" saw share price growth that outperformed low-scoring companies by an average margin of 9.2% in the six months following the survey. Similarly, companies that scored high on the item "My job performance is evaluated fairly" surpassed their low-scoring counterparts by 5.9% in share price growth in the following six months.
Additional key contributors
While enablement and recognition proved to be the most significant drivers, the study identified other contributing factors as well. Role clarity, company confidence, and perceptions of leadership decisions are also key drivers of the employee experience that predict future share price growth.
How employee experience drives business impact
Dr. Joel Davies, Research Manager at Culture Amp, emphasizes that prioritizing the employee experience is not merely a "nice-to-have" initiative but a business imperative. Neglecting the employee experience during challenging economic times can result in underperformance and the loss of customers to more engaged competitors.
Culture Amp’s data provides clear evidence of the outsized influence of the employee experience on organizational success. How can leaders benefit from these insights? To enhance employee experience related to share price growth, focus on improving knowledge management systems, involving employees in resource allocation decisions, articulating a compelling vision, providing role clarity, and fostering a rigorous and fair performance management process.
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