Good Work Environment = Higher Returns

It turns out that the stock of the best companies to work for actually beats the market.

Stocks of the public companies on FORTUNE's "100 Best Companies to Work for" list produced more than 3 times the gains of the broad market over the last seven years, according to a study released by Great Place to Work Institute and Russell Investment Group. The study suggests a strong link between workplace culture and a business's financial performance. "Great workplaces have significant competitive advantages as a result of the high trust relationships between employees and management," says Amy Lyman, Ph.D., President and Co-founder of Great Place to Work Institute, the firm that selects companies for the FORTUNE list. "Trust can contribute to higher levels of cooperation, greater commitment, lower employee turnover, decreased use of sick time and improved customer support." Russell analysts compared the performance of a stock portfolio based on the "100 Best" list to the performance of the Russell 3000 Index (representing the broad US equity market) and the S&P 500 (representing large-cap investments). The study found that the "100 Best" portfolio, adjusted annually to reflect changes to the list between 1998 and 2004, provided a cumulative return of 176%, compared with lesser gains of 42% for the Russell 3000 and 39% by the S&P 500.

It's funny that I've actually heard executives complain about employees wanting a better work environment. They think the employees will just take advantage of the flexibility. My response… so what? Maybe that will make them happier and more productive.

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