When searching for a strong company to invest in, investors (and speculators, for that matter) often only look for the obvious tangibles. First and foremost, they will attempt to find a historic pattern resonating from the company’s share price – basing the future of the company on its past and, therefore, not taking into account the potential to grow. Secondly, investors will seek out the numbers in the company’s financial reports – the dividend yield; the P/E ratio, etc. Whilst the numbers are (obviously) incredibly important when making a purchase decision,…
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When searching for a strong company to invest in, investors (and speculators, for that matter) often only look for the obvious tangibles.
First and foremost, they will attempt to find a historic pattern resonating from the company’s share price – basing the future of the company on its past and, therefore, not taking into account the potential to grow. Secondly, investors will seek out the numbers in the company’s financial reports – the dividend yield; the P/E ratio, etc. Whilst the numbers are (obviously) incredibly important when making a purchase decision, other vital intangible elements are commonly forgotten.
Employee satisfaction is the intangible that I speak of, being one of the most underappreciated attributes to a successful company. Employee satisfaction is created within the company’s internal environment – a strong set of values that develop within an organisation which supports the company’s mission, and guides the behavior of its team.
When a team member feels valued in their workplace, they are driven to continue performing to the best of their abilities – driving the company forward and offering their brightest ideas. Take Google (NASDAQ: GOOG) as a perfect example.
Google has created a culture like no other – staff members work in an informal office environment filled with beanbags and PlayStations to help them relax when stressed, and are offered unlimited sick leave and annual leave (which staff members do not take for granted). Each team member is also given a full day of work per week to work on a personal assignment – Google Maps, Google Calendar and Gmail were all created by employees during this time allocation.
Once accepted into such an environment, team members are very unlikely to want to leave, keeping staff turnover levels, and therefore recruiting and training costs, to a minimum. One of the Motley Fool founders, David Gardner, outlined that Steve Jobs, founder and CEO of Apple (NASDAQ: AAPL) and CEO of Dolby Laboratories Inc. (NYSE: DLB), spent 20% of his time interviewing to find ‘really good’ staff, who he valued to be 60x as good as a normal employee. Bright people want to stay working with other bright people – a company full of ‘really good’ staff members is certainly somewhere I’d want my money!
To work as part of a team means striving towards the same goals. Often in companies where staff morale is low, purpose is lost. People go to work to do their job and go home – sometimes putting in the bare minimum. To keep morale high however, employees want to go to work with the intention of ‘making a difference’.
It is no surprise that companies who offer outstanding employee benefits make repeat appearances in lists such as the Fortune 100 Best Companies To Work For, or the Australian version, Best Places to Work in Australia. Companies that feature on these lists are often sound investment ideas, because their culture and values are spread between team members and translated into excellent customer service and customer value which, in turn, keeps customers coming back for more.
Employee satisfaction is hard to measure, and is therefore often ignored as a factor when making a decision to invest. Employees who feel valued are more likely to offer a higher quality service or product, keeping customers coming back for more. This competitive advantage can drive a company to greater profits, as has been the case at Google and Apple.
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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.