There is a significant financial incentive for organizations to provide a quality employee experience (EX).
This is according to a study by Willis Towers Watson, which utilized a deep data source of employee feedback, including a survey of over 500 companies, close to 50 years of research and a total database approaching 250 million employees.
“Our research shows that companies with a strong overall EX outperform their sector peers on top-line growth, profitability growth, and returns on assets and equity, not only in the short term, but over the long term too,” said Stephen Young, global practice leader, employee insights at Willis Towers Watson.
The study found organizations that demonstrate a strong employee experience consistently beat their sector on average by a clear margin of two to four percentage points (pp) across key performance metrics, including return on assets and equity, one-year change in profitability, and three-year changes in revenue and profitability. In contrast, companies delivering less effective employee experiences consistently underperformed their peers by 1pp to 10pp.
“This model of research answers the ROI question that has been historically elusive,” said Marta Turba, vice president of content management at WorldatWork. “It may help focus human resources and rewards leaders beyond the essentials to those differentiators that are most likely to engage, inspire and optimize the workforce — and bring improved financial returns.”
The study uncovered that, for each financial measure, organizations with low EX scores had the poorest financial performance and companies with high EX scores were the best financial performers. For example:
- Return on equity: Low EX companies were 6pp below the index; strong EX companies performed 3pp above the benchmark.
- One-year change in gross profit margin: Low EX companies were 10pp below the index; strong EX companies performed 3pp above the index.
- Three-year revenue growth: Low EX companies were 1pp below the index; strong EX companies performed 4pp above the index.
“The world’s leading organizations increasingly focus on EX,” said Patrick Kulesa, senior research director at Willis Towers Watson Research and Innovation Center. “We found the highest performing companies have a very strong focus on how their employees feel about the organization, from inspired by its purpose and trust in leadership, to confident in achieving career aspirations. These factors set organizations apart.”
Willis Towers Watson’s employee surveys tap into all aspects of EX, from local conditions — such as training opportunities, immediate supervision and teamwork — to aspects of organizational functioning — such as senior leadership effectiveness, customer focus and company competitiveness. Evidence for the model was developed by examining an elite group of strong EX clients that are market-leading in financial results. This “high-performance” group represents about 30 companies annually.
What makes EX unique in the high-performance group are key aspects reflecting the mindset of employees in the best companies, e.g., feeling inspired by the company’s mission and purpose; being able to achieve one’s potential and career aspirations; having a deep sense of trust in senior leadership; and having a sense of drive through strong customer focus, and innovation and agility in meeting marketplace demands.
Other elements of EX showed little differentiation between the high-performance group and other companies, including the basic understanding of work goals and objectives; support for employee effort from local managers; and organizing work through scheduling and internal structures, efficient processes and workplace flexibility.
About the Author
Brett Christie is a staff writer at WorldatWork.