SI Review: April 2011

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Research Report: Treat Employees Well

Treat Them Well: Being good to employees increases a company’s profitability

Does going the extra mile for employees really pay off? How important is company culture? It turns out it is vital. Here’s why.

Focusing on internal workers is good for earnings, according to results from a survey of 611 staffing firms by Staffing Industry Analysts, which publishes this magazine. Among the survey’s findings was that good treatment of internal employees and overall company profitability are closely linked.

“We compared staffing firms in terms of priorities and years of consistent profitability,” says Jon Osborne, vice president of research at Staffing Industry Analysts. “Companies that made internal employees a priority — in terms of training, company culture and recruiting — were on average more consistently profitable than firms with other priorities.”

The survey asked about 14 priorities in all. While priorities that focused on internal workers were at the top, others such as cutting costs and improving cash flow were not as associated with consistent profitability.

“Just going directly for ‘I want to grow revenue’ doesn’t work as well as taking a step back and thinking ‘where does the revenue come from?’“ Osborne says. “You’re still reaching for growth and profitability, but you’re doing it in a more intelligent and effective way.”

In particular, firms that reported their main concerns to be “training/developing internal employees,” “creating a positive company culture” and “recruiting/retaining quality internal staff” were the most consistently profitable.

Firms that said “training/developing internal employees” was their top priority averaged 4.4 years of consistent profitability.

Culture came in as the second-highest priority when compared with consistent profitability. Staffing firms that cited “creating a positive company culture” as a top priority averaged 4.1 years of consistent profitability.

Following culture was “recruiting/retaining quality internal staff.” Staffing firms that cited this as a top priority averaged 4.0 years of consistent profitability.

Staffing firms in general averaged 3.3 years of consistent profitability.

Acquiring and ensuring survival

On the other end of the spectrum, SIA’s survey found that firms that made “acquiring other firms” a priority had the lowest level of consistent profitability, averaging just 1.7 years.

Next up, firms that reported “ensuring business survival” was a priority averaged 1.9 years of profitabilty.

In some cases, it could be argued profitability dictates priorities rather than priorities dictating profitability. For example, firms that are unprofitable may be more likely to select “ensuring business survival” as a top priority.

However, academic research as well as anecdotal evidence also suggest happy employees are good for earnings.

One example, research by Professor Alex Edmans of the Wharton School at the University of Pennsylvania found that stocks of firms listed on a Fortune magazine “Best Companies to Work For” list outperformed industry benchmarks.

In addition, information from staffing companies on Staffing Industry Analysts’ “Best Staffing Firms to Work For” list corroborates data showing that treating employees well can be good for a firm’s finances.

Best Staffing Firms to Work For

The “Best Staffing Firms to Work For” program didn’t measure firms in terms of revenue growth or profitability, but several top firms reported being a great place to work spurred revenue growth. And a number of those firms cited the same key priorities that ranked high in the research.

Training was cited by several firms that were finalists in the “Best staffing firms to work For” program. Some of the firms noted they pair newer employees with mentors among other training techniques.

Culture and hiring the right internal staff also figured prominently when firms described what makes them great places to work.

“It’s not just an ideological thing or altruistic thing,” CHG Healthcare Services CEO Michael Weinholtz said in an interview regarding the Best Staffing Firms to Work For. “We really believe that our great culture and being a great place to work is a competitive advantage.”

Being a great place to work allows it to attract the best people in the industry, Weinholtz said, adding “having great people leads to great performance.”

Craig Johnson is managing editor of SI Review. He can be reached at cjohnson@staffingindustry.com.

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