Newsletter – Employee Morale

It is common knowledge that high morale (happy) employees are better for business than low morale (unhappy) employees. Troop morale has been an important metric for military and business leaders for a very long time. The question is can morale be correlated to other business metrics, like share price. According to a 2016 paper published by the Harvard Business Review (HBR) the answer is yes.

The HBR article is about a study by Alex Edmans, professor of finance at London business school, that analyzed 28 years of stock market data to see if there was a statistically valid correlation between a firm’s value and employee satisfaction. Alex explains in detail his methods, bottom line is he found companies that treat their employees better, do better. For us Lean Six Sigma folks we should recognize the discovery of a leading metric.

Leading metrics are awesome because they predict some future outcome. So when investors research companies they can look for those who focus on employee satisfaction and developing employee skills (to include Lean Six Sigma training of course). Those companies have a statistically greater chance of higher stock prices. Pretty cool, egh?

While great for investors, this data also aids in executive decision making. When it is understood that investing in people it will pay off in long term stock price, decisions become easier. All the Belt certified people reading this should recognize the Y=f(x) formula. Stock price is a function of employee satisfaction. It’s a beautiful thing.

My passion for Lean Six Sigma stems from the core value of “Respect for people”. This HBR article highlights when companies take care of the employees, employees take better care of the customers, and customers will take care of the share price. It’s really not that complicated. Hope you enjoyed and see you in the Gemba!

Stay happy my friends, Erik

P.S. I shared the HBR article on my LinkedIn page.