High morale helps boost a company's share price

Feb 09 2006 by Brian Amble Print This Article

A happy, motivated workforce is not just nice to have it can help you perform better on the markets, too, according to new research from the U.S.

The study by researcher Sirota Survey Intelligence has found firms with strong employee morale outperform similar companies with medium to low morale on the stock market.

The study of 24 companies looked at their performance over the past five years, comparing it with average industry stock prices of 5,500 other companies in the same industries.

What it found was that last year the stock prices of the 11 highest morale companies increased by an average of 19.4 per cent.

By comparison those of other companies in the same industries rose by an average of only 8 per cent.

The prices of the 13 medium or low morale companies grew by just 10 per cent, while those in the same industries climbed by an average of 19 per cent.

High morale companies were those where at least 70 per cent of employees expressed overall satisfaction with their jobs in employee attitude surveys.

"Morale is a direct consequence of being treated well by a company, and employees return the 'gift' of good treatment with higher productivity and work quality, lower turnover (which reduces recruiting and training costs), a decrease in workers shirking their duties and a superior pool of job applicants. These gains translate directly into higher company profitability," said report author David Sirota.

"Satisfied employees lead to satisfied customers, which results in higher sales. Satisfied customers and higher sales, in turn, result in more satisfied employees who can enjoy a sense of achievement and the material benefits that come from working for a successful company. It's a virtuous circle," he added.

But companies should not be lulled into a false sense of security over rising stock market prices, a separate study has concluded.

The research by the Centre for Economics and Business Research has predicted that global stock markets will rise by between 20-30 per cent over the next two years, after which the bubble is likely to burst.