Studies show that great workplaces enjoy lower turnover and better financial performance than industry peers. But do these companies really achieve greater financial success over the long haul? Here I'll examine whether companies praised by their employees also receive applause from shareholders.
Fortune magazine publishes a list of the "100 Best Companies to Work For" every year. In order to make the list, the companies are evaluated using a model developed by the Great Place to Work Institute. The model claims that employees value six attributes: trust, credibility, fairness, pride, respect, and camaraderie. The companies are rated based on what actions they take to foster these attributes in their work environments.
Just less than half of the companies on the list operate as either private businesses or non-profit entities. Some private businesses, such as Wegmans Food Markets, Container Store, and Edward Jones, have materialized near the top of the list for more than a decade. For my cursory analysis, I concentrated on the publically traded companies.
Crunching the numbers
For the 51 publically traded companies on the list, I homed in on the ones that consistently secured spots on the Fortune list over the past decade. That left me with a tidy group of 13 companies: five tech companies, four consumer goods producers, two financial-services providers, one retailer, and one telecom. I compared the performance of the five tech stocks to PowerShares QQQ, a surrogate for the NASDAQ 100 that takes dividend reinvestment into account, over the one-year, three-year, five-year, and 10-year periods. I compared the remaining eight non-tech stocks to the SPDR S&P 500
The tech stocks outperformed the PowerShares ETF in the one-year and 10-year periods. Over the 10-year period, the basket of tech stocks outperformed the PowerShares ETF by nearly 60 percentage points -- 183% total return, versus 125%.
For the non-tech stocks, the SPDR ETF actually outperformed in each period except the 10-year period, when the basket returned 107% total return, versus 58% for the SPDR ETF.
Feel-good food retailer Whole Foods Market
Not too shabby
You gotta be kidding me
Despite its recent floggings in the press, I was shocked to find Goldman Sachs
The mere appearance of a company on the Fortune list does not warrant investing money in its stock. Admittedly, my results are inconclusive, but I think they provide an interesting springboard to further scrutinize companies. Based on what I found, though, I'd put my money on Whole Foods. It has enjoyed amazing financial success for itself and for its shareholders. Its business model is impressive, and the company still has room to grow. But don't take my word for it -- dig in and see what you find.
Two other companies that are noted for treating their employees well and putting customers first are featured in a free report crafted by my Foolish cohorts. Learn who these companies are by reading the fantastic report.