Corporate America, here’s the secret to a better bottom line

Does employee wellbeing mean a better bottom line?

Fortune teamed up with Thrive Global, SAP SuccessFactors, and Qualtrics to build the Thrive XM Index*, a ranking of companies with the best employee wellbeing.

To create the index, we surveyed a sample of more than 20,000 full-time U.S. employees from over 900 companies. We asked them about everything: work-life balance, career advancement, mental health, company policies.

From this massive survey, Thrive Global researchers used a scoring algorithm to generate the score for companies.

Then they looked at the highest-ranked companies on the index to see if their better employee experiences translated into better financial results.

Here’s what they found.

Table of Contents

The numbers to know

27.2{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}

… is the average stock-market return among the top 10{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} of companies in the Thrive XM Index, year to date.

34{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}

… is the predicted increase in retention among employees who say they’re satisfied with how their company handles workplace conflicts.

37{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}

… is the predicted increase in retention among employees who say their companies are understanding in regards to mental health.

21{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}

… is the predicted increase in employee performance among companies that best help staff learn new skills.

11 spots

… are the average jumps up in Fortune 500 rank among the top 10{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} of companies in the Thrive XM Index, from 2019 to 2020.

The big picture

Surprise: Business success and employee wellbeing go hand in hand. The top-ranked companies on the Thrive XM Index outperformed their peers in terms of profits and stock price growth—through the pandemic, no less. The big takeaway: Don’t take your employees’ or coworkers’ wellbeing for granted. It matters (to the bottom line, too).

A few deeper takeaways

1. It’s simple: Happy employees equal happy shareholders.

Since late March, the S&P 500 Index has rebounded from 2,304 to 3,380 points. But that rebound has been wildly uneven across businesses, with some companies doubling in value while others still sit near their March lows.

The top-ranked Thrive XM Index companies—even when factoring in industry—saw their stock gains outperform those of their peers. The top 10{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} of Thrive XM Index companies saw their return on equity climb 27.2{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} in the second quarter of 2020.

The same goes for profits: Among the top 10{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} of Thrive XM Index companies, EBITDA climbed 24.8{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} in the second quarter.

Maybe stakeholder capitalism is good for shareholders after all?

2. Workplaces that prioritize employees’ mental health see lifts in work engagement.

Employers rated highly for being flexible with staff mental health also have less stressed workforces.

And with anxiety and depression soaring during the pandemic, it’s more important than ever for employers to take note of mental health.

“We must fundamentally reimagine our work culture to build mental resilience at its core. It means moving from a burnout culture to a culture with wellbeing at the center,” Arianna Huffington, who played a role in designing the Thrive XM Index concept, wrote to Thrive and Fortune.

3. Workplaces that help employees learn new skills see improved performance.

The companies ranked higher for helping staff learn new skills have workforces with 21{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} higher performance—and 31{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} increase in likelihood of retention.

Want to cut down on your recruiting cost? Maybe pony up more money for night classes for your staff.

I’d love to know what you think of the newsletter. Email me with feedback at [email protected].

Lance Lambert
@NewsLambert

You can find past Fortune Analytics newsletter issues archived here.

*Methodology: Thrive Global, SAP SuccessFactors, Qualtrics and Fortune teamed up to build the Thrive XM Index. To create the Thrive XM Index, the group surveyed a sample of more than 20,000 full-time U.S. employees from over 900 distinct companies across the country, asking than 100 questions describing the influence their organization has/had on critical life experiences and moments that matter—both in and outside of the workplace—as well as the impact working for their company has on their holistic wellbeing.

All employee experience data was collected between August and November 2019. Thrive XM Index scores were calculated only for those companies incorporated in the U.S. and eligible for the Fortune 500. We required enough responses in each participating company to reach a 95{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} statistical Confidence Level and 5{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} Margin of Error or better.

For a full methodology go here.