Culture eats the stock market for breakfast

Peter Drucker died in 2005 but I’m sure he’d be very pleased to know that there’s growing evidence his famous quote “culture eats strategy for breakfast” is indeed true.

By Nic Marks

Culture eats the stock market for breakfast

Of course, he didn’t mean that strategy wasn’t important, but that, however good your strategy, it’s not possible to implement it if you don’t have a positive culture at work.

Evidence of this continues to emerge from academia. Researchers create “shadow” investment funds made up of companies that are in the Great Place to Work list or score highly on the employee rating website Glassdoor. Then they see how their “funds” would have done in reality. Recently the University of East Anglia ran this exercise and their results suggest returns would have been a whooping 10% extra per year – even higher than earlier of estimates of between 3-6%. While the academics might debate each other’s methods and findings, they do all agree on one thing - the returns on a good work culture are positive and significant!

Perhaps even more impressive evidence comes from people who are putting their money where their mouth is. A good example is the Happy @ Work fund based in Paris and launched in 2015. I asked fund manager Claire Batailie what their strategy was and she told me: “It is our conviction that happy and engaged employees are crucial for the sustainable performance of organizations so we only invest in companies that enable their employees to be fulfilled at work.”

Their strategy seems to be working as the fund has grown in value by 12.3% since its launch compared to just 1.3% for Euro Stoxx TR benchmark that they compare themselves to. Claire was very responsible though and did ask me to remind readers that “past performance is not a reliable indicator of future returns”!

I have been doing my own research into the value of a happiness- led approach, ahead of my keynote at the forthcoming Glassdoor conference. I looked at Glassdoor’s top 20 “Best Places to Work” as ranked by employees and found 11 of them were listed on the UK stock market. While the FTSE 100 index fell by 13% in 2018; eight of these 11 saw their share prices rise and only one fell by more than the FTSE itself.

All in all it is pretty clear that a positive culture is not just a nice to have – it can help business leaders deliver their strategies and achieve the share price growth their investors desire. It’s a classic win-win, especially as a good work culture is great for the employees too.

That doesn’t make it easy though - everyone knows it takes time to build trust, but only a moment to lose it.

The best way to build and maintain a positive culture is to track employee happiness regularly and consistently. This enables leaders at all levels to build on successes, as well as quickly tackle any setbacks. Bit by bit, little by little, week by week - that is how you build a great culture that will deliver happiness for everyone: employees, business leaders and investors.

Read our top tips on leading with happiness here