In October 2012, the Employee Engagement Alliance
created a stock index (ECSI) to attempt to show a connection between a company’s
performance in the stock market and employee engagement. Engaging the
services of McBassi & Co (an HR analytics expert) the EEA developed the
ECSI based on McBassi’s Good Company Index which tracks several hundred public companies based on their levels of
customer, employee and community engagement collected from about a dozen
different sources.
From the Good Company Index list of companies, the EEA extracts
about 45 each year to form their ECSI. Traditionally
it turns over about 40% of that list as it calculates new scores. The methodology for the Good Company Index
can be found here.
The current ECSI showed it outperformed the S&P by 21.4% over
four years. Obviously from this perspective, you may want to conclude that the
companies with higher employment engagement, as measured by McBassi, had great
bottom line results than those that don’t.
However the stock market has volatility based on a number of various
factors.
Is this a case of the tail wagging the dog? Maybe. Is this empirical proof that recognition and employee engagement
produces better bottom line results? No. Are ECSI companies cherry picked to skew the outcomes? Probably not.
Or is this the case of the cart before the horse? Possibly. And while we are certainly not experts in analyzing
the methods or strategies used to develop the ECSI, we are pleased that the EEA
has made the attempt to connect the dots between employee engagement budgets
and bottom line results.
As one of these articles mentions “Companies that ignore stocks selected based on
environmental, social and governance factors (ESG sector) do so at their
peril…Good corporate governance plays a winning hand in capital allocation and
is critical to corporate longevity.”
From our experience we know that highly motivated
and satisfied employees will produce dramatic results. And that employee recognition is the cornerstone
of a highly satisfied employee.
For more
information on Ultimate Choice Inc.’s products or services or other white
papers please contact us at Ultimatechoiceinfo@cox.net
