Companies reap bigger dividends from happier staff

Just 18 months ago, the Californian chipmaker Nvidia — which started life in 1993 as a specialist provider of 3D graphics for computer games — operated in relative obscurity. However, a surge of interest in artificial intelligence has changed all that. As investors fell over themselves to find the companies they thought would make the most money from generative AI, Nvidia’s share price took off.

Last year, it was the best-performing stock in the S&P 500, rising 239 per cent, while in February this year it recorded the largest one-day gain in Wall Street history after its quarterly report beat expectations.

The fact that Nvidia is one of the dominant suppliers of AI hardware and software suggests the share price jump is no fluke. But there are some observers who believe these impressive stock market gains are not only linked to what Nvidia makes but also to the way it treats its staff.

Because as well as notching up hefty share price increases, Nvidia routinely appears either at the top, or near the top, of lists of best companies to work for. It is frequently recognised for its flexible working practices, generous paid leave, and subsidised childcare.

For academics Jan-Emmanuel De Neve and George Ward at the University of Oxford, and Micah Kaats at Harvard University, it is no surprise, then, that the company’s share price has performed so strongly: their recent study provides the clearest link yet between staff wellbeing and financial performance in quoted US companies. “We find that higher levels of wellbeing generally predict higher firm valuations, higher return on assets, higher gross profits, and better stock market performance,” they write in a 42-page paper.

Their analysis finds that companies with greater profitability and higher stock market performance tend to have staff who cite greater happiness, purpose and job satisfaction. The academics say theirs is the most comprehensive study to date to make this link.

“The reality is that many employers have not always prioritised the wellbeing of their employees,” says De Neve, professor of economics and behavioural science at Oxford’s Saïd Business School. “Investing in wellbeing is often seen as a trade-off with other organisational goals. However, contrary to this assumption, the firm-level evidence we present suggests that there may be strong business-related reasons to invest in employee wellbeing.”

The study was based on 15mn surveys completed by employees at more than 1,600 publicly listed companies, which was collected via the Indeed recruitment website.

Sarah Carroll, a career expert at Indeed, says: “The study shows the top 100 companies for wellbeing delivered 20 per cent higher returns than the S&P 500, and 30 per cent higher returns than the Nasdaq. They also found that firms being mentioned in ‘best places to work’ lists noticed a stock market bump in the days following the announcement.”

Prioritising workplace wellbeing, she adds, is more than just a nice-to-have: “it is key to creating happier and more productive teams”.

There is no one-size-fits-all approach to wellbeing and it equally doesn’t require a certain budget to execute well

Nvidia reports profits well into the tens of billions of dollars and is obviously well equipped to show generosity to its employees. But Chris Eldridge, chief executive, UK and Ireland and North America, at recruitment group Robert Walters, says workplace wellbeing is not only achievable for companies with sizeable budgets.

“There are numerous ways employers can be supportive of workplace wellbeing without breaking the bank,” he suggests. “Flexible work arrangements are one of the most widely used, and widely successful, incentives that could also actually save money for companies in terms of rent and running costs.

“Improving access to mental health resources and offering paid sabbaticals as well as volunteering days all enrich employee wellbeing — and come at a low cost to the company,” says Eldridge.

Trisha Brookes, director of people and culture at recruiter Hays, agrees: “There is no one-size-fits-all approach to wellbeing and it equally doesn’t require a certain budget to execute well. One of the most effective ways to support employee wellbeing is to understand what people want within your organisation — however big or small.”

So, what are some of the perks employees most want that can help drive share price success? According to Brookes, employees are less inspired by benefits that may appear superficial, such as pool tables, office dogs, or onsite baristas.

Taking the UK as an example, she says Hays’ own research shows prospective employees want more than 28 days paid annual leave, additional days off if and when they need them for personal reasons, and private medical insurance.

“The benefits and perks now most favoured are those that will have a tangible impact on an employee’s life outside of work — rather than inside the office,” Brookes explains.