I admit it, I am biased. I’ve held the belief that great HR mattered even when I wasn’t doing formal research on the subject. My career began in the research division of the Corporate Leadership Council, and 20+ years later, I find myself formally studying the impact of great HR once again. In fact, in my role at the mission-driven HR Certification Institute, researching best HR practices is my full-time job.
Recently, HRCI and Top Employers Institute published research describing exciting new evidence that better business performance – as measured by higher stock prices, faster revenue growth and more favorable employer brand perception – is correlated both with organization-wide certification of HR best practices and with the employment of a proportion of HR-certified professionals (HRCI-certified professionals, to be exact). Read Emerging Evidence: Business Performance and the Validation of HR Best Practices.
Not long after we presented our research to the HR community and announced it to the business world at large, I headed out for the conference season to watch world class HR leaders like 3M, LinkedIn, Jack in the Box and REI do their thing. I caught the i4cp Next Practices Now conference in Scottsdale and there I discovered many more professionals who agree with me. Presenter after presenter spoke about and into the empirical data that i4cp has shown links people practices to market performance. Check out i4cp’s People-Profit ChainTM.
"Our research into the people practices that distinguish high-performance organizations provides statistical evidence into what most executives only intuitively appreciate," said Kevin Martin, chief research officer at the Institute for Corporate Productivity (i4cp). "For example, decades of i4cp research has revealed a consistent and reliable set of 25 key performance indicators that account for up to 28 percent of the variance in an organization's overall market performance."
Afterwards, I headed even farther west for the 2016 Great Place to Work Conference where I met Great Place to Work® Institute’s Kim Peters and learned that the FORTUNE 100 Best Companies to Work For®, so ranked for their high-trust workplace culture, consistently outperform major stock indices by a factor of two.
“Our work creating a growing set of best workplace rankings and consulting with clients keeps pointing to the same conclusion,” Peters said. “Companies that prioritize trust through great people practices win in the marketplace. The old saying is true: ‘Take care of your employees, and they’ll take care of the business.’”
Fortune’s research over 30 years in more than 40 countries indicates that employees at “100 Best” companies were more satisfied with their jobs and listed companies enjoyed higher customer satisfaction and on average, experience about half the voluntary turnover of their industry peers. In the financial services and insurance sector, for instance, 100 Best companies have just seven percent voluntary turnover compared to the sector average of 15 percent.
Scripps Health, a Great Places to Work (GPTW) client, faced operating losses, high turnover and labor shortages. The GPTW Trust Index looked at Scripps Health’s metrics of employee experience and financial performance over time. In 2002, Scripps Health had 54 percent positive responses (either a 4 or 5 on a five-point scale) with a $10M profit. In 2010, after leaders focused on building a great workplace, they drastically improved their turnover rates and employee morale and had 83 percent positive responses with a $133M profit, an increase of over 1200%. Read the Scripps Health case study.
What does this say about Fortune’s 100 Best companies? It says that leaders at great companies focus not only on financial performance but also on creating a high-trust workplace culture. As Peters pointed out, GPTW case studies also show that the ROI on investing in workplace culture demonstrates additional, industry-specific benefits including reduced shrinkage, improved track records of safety, higher patient satisfaction, better quality job applicants, and more.
So, while I might not be all that original in my long-held belief, I’d say there’s more than just emerging evidence that HR best practices are linked with better business performance. Great HR matters – not only to employees, but also to the bottom line.