What a Good Glassdoor Rating Can Tell You About the Health of a Business

Glassdoor.com is bringing more transparency to work environments while aiding job seekers and prospective employers. Here is why every long-term investor should be paying close attention to Glassdoor.

Mar 25, 2014 at 12:23PM

Glassdoor.com -- a website that allows employees to anonymously review their place of current or former employment -- is a tool commonly used by prospective job seekers. The insights Glassdoor offers into company cultures and leadership, however, are equally valuable for investors. Here are three reasons long-term investors should be paying close attention to company reviews on Glassdoor. 


1. Happier employees are more productive 
This may seem like common sense, but research really does back up this simple concept. A team of economists at the Warwick Business School conducted a study attempting to identify a link between an individual's happiness levels and productivity. "Happier workers, our research found, were 12% more productive," the researchers concluded. "Unhappier workers were 10% less productive." The report also suggested that "economists and other social scientists may need to pay more attention to emotional well-being as a causal force."

What causes employees to be happy? This is the question proactive businesses are attempting to answer. Glassdoor's marketplace of employee reviews helps employees reveal the positives and negatives of their respective workplaces. Investors should carefully review this employee feedback, which provides critical insights into the company cultures in which we may invest our hard-earned dollars. 

2. Values engage employees
In its 2012 Global Workforce Study, Towers Watson surveyed more than 32,000 employees in 29 countries and found that only 35% of employees feel "highly engaged" with their respective place of work. 43% consider themselves "detached" or "disengaged" in the workplace. Tom Gardner, co-founder and CEO of The Motley Fool, and Morgan Housel put this into visual terms: 

"Imagine a 10-person bicycle. This means that three people are pedaling, five are pretending to pedal, and two are jamming the brakes." Such is the state of the corporate world today. Glassdoor, however, gives us a glimpse into the company cultures that are bucking the trend and proactively developing workplaces that cultivate, engage, and retain top talent.

LinkedIn (NYSE:LNKD) CEO Jeff Weiner -- ranked by employees as the best CEO in 2014 among companies with more than 1,000 employees -- explains that LinkedIn's success "starts with investing heavily in our culture and values and not just talking about it but walking the walk." Whether it be Weiner's bi-monthly company meetings with employees, free yoga classes for employees, or encouraging employees to pitch and develop new ideas, the company's employee rating of 4.5/5 on Glassdoor shows there is much other businesses can learn from LinkedIn's dynamic employee culture.

LinkedIn has also turned in stellar financial results, with total sales increasing an average of 58.4% annually since 2010. Since going public in 2011, the stock has increased more than 100%, handily beating the S&P 500's performance of 39% over the same period.  

3. Employee retention 
As you may be able to guess by now, the level of employee happiness and engagement in the workplace plays a major role in a company's ability (or lack thereof) to retain employees. In a 2012 survey from the American Psychological Association, employees most commonly cited reasons such as work-life fit and enjoying their work tasks as the top reasons to stay with their current employer. "For employees who said they plan to stay with their current employers for more than two years," the survey noted, "the biggest drivers of expected tenure were enjoying the work, having a job that fits well with other life demands, and feeling connected to the organization."

Entrepreneur and author Nilofer Merchant puts this concept in other terms: "Money motivates neither the best people nor the best in people. Purpose does." When it comes to retaining employees, purpose trumps monetary benefits. 

Finding ways to retain employees is in the best interest of a business, considering employee turnover can become a major a drain on a company's financial bottom line and overall success. When a business loses an employee, it is losing the productivity, knowledge, and specialty of that individual. Dollars will have to be spent recruiting, interviewing, and training new employees. An organization's long-term viability should be called into question if its leadership does not recognize the importance (and financial sense) of attracting and retaining employee talent, particularly given today's growing workplace transparency thanks to services such as Glassdoor.

Costco Wholesale (NASDAQ:COST) -- which enjoys a 3.8/5 rating on Glassdoor, while CEO Craig Jelinek is the #5-rated CEO in the country with a 95% employee approval rating -- serves as a prime example of the benefits of employee retention. Costco's average turnover in an employee's first year is 6% -- this number drops below 5% for employees who stay longer than one year -- compared to over 20% employee turnover for Wal-Mart. Over the past decade Costco has tripled for investors, crushing the S&P 500's returns by more than three times in the process. 

Foolish bottom line 
Glassdoor is still a growing service, but it already offers investors the opportunity to see what is really going on behind the scenes of our current and prospective investments. As Glassdoor adds to its 6 million pieces of content (and approximately 14 million unique monthly visitors), companies will be increasingly evaluated on their ability to please and retain top employee talent. Innovative company cultures will become the norm, not the exception. 

Over time, top talent will likely gravitate to (and remain with) companies that offer the most rewarding and values-driven environments for employees. These innovative company cultures will more likely than not -- based on the research reviewed above -- lead to more productive and longer-serving employees. These are exactly the company cultures that Foolish long-term investors should seek out. Thanks to services like Glassdoor, this has never been easier. 

The next step for you
Want to profit on business analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing ... starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.

David Kretzmann owns shares of Costco Wholesale and LinkedIn. You can follow David on his Foolish discussion board, Pencils Palace, on CAPS, or on Twitter @David_Kretzmann. Learn more about David's Pencils IRA Project at Fool.com. The Motley Fool recommends Costco Wholesale and LinkedIn. The Motley Fool owns shares of Costco Wholesale and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers