You can scour income statements, balance sheets, and cash flow statements without ever finding morale listed as a line item. However, we would be hard-pressed to deny that a disgruntled hire can be a liability -- or a happy one an asset.

Consider Genentech (NYSE:DNA). After a string of three successful drug launches, the company decided to party in style. Remember when Tyco's (NYSE:TYC) Dennis Kozlowski threw an exotic toga soiree on his company's tab and only flew in select executives? Well, Genentech did it right. It invited every single employee to enjoy the lavish event. Special musical guest? Elton John. Is it any wonder that Genentech's voluntary employee turnover is a mere 6%?

More importantly, since the company's bash on May 7, 2004, the stock has risen by roughly 50%. Over the past two decades, the stock has risen by a whopping 1,700%, blowing the market away -- with apologies to Sir John -- like a candle in the wind.

That's what upbeat morale will do for you. Remember when Google (NASDAQ:GOOG) went public? Yes, you're still kicking yourself over not getting in on that one, right? After the successful IPO last summer, cynics started pointing to mid-November as a reality check. That's when the lockup would expire and 39 million insider shares could conceivably flood the market. Making matters worse, the company's founders and its CEO had committed themselves to an 18-month divestiture plan to cash in on part of their gargantuan stakes in the dot-com giant. Surely employees would follow? Surely they would take advantage of the buoyant share price and bail on the stock -- and the company?

Not quite. Some have sold, of course, but not in the numbers that would send the stock tanking. In fact, shares of Google have shot up by 65% since the November 16 lockup expiration.

Turnaround investing vs. turn around investing
One of the cruelest market moves is when a stock is bid higher the day the company announces massive layoffs. It's often an ill-advised, knee-jerk reaction. Investors think a struggling company is finally addressing its maladies when in reality, it's simply following through on the symptoms of contagious irrelevance. Yes, it will save some money in the near-term, but if morale is shot as those who are left behind start worrying about when the other shoe is going to drop, the company is toast.

Unless the executives are the ones on the block in a regime change, do you really expect the same management team that led a company astray to be successful in turning it around with fewer hires?

Sometimes it works perfectly. That's when turnaround investing really pays off. Me? I'd rather go for turn around investing. What's that? It's when a company is doing something so right that you have little choice but to turn around and take notice.

The strategy we're using in our Rule Breakers newsletter service, which is already beating the market by 10 percentage points? That's turn around investing, folks.

Shiny faces in dull portraits
The beauty of happy employees as an investing driver is that it works just as well in sectors that most investors have left for dead. Take supermarkets -- a horrible sector, right? Employee turnover averages 100% (meaning that the average employee will last for just one year). Grocers fight tooth and nail for pathetic net margins in the 1% to 2% range. It's not pretty. However, in Fortune's 2005 list of the best places to work, a grocery store chain tops the list. Unfortunately, Wegman's is privately held.

However, a few notches down the list you'll find organic grocer Whole Foods Market (NASDAQ:WFMI). Here you have a natural-foods specialist that lives by the credo of keeping it real. That extends beyond its pesticide-free produce. Every employee knows what every other employee is making at the company through a wage disclosure report. A salary cap also limits the top pay to no more than 14 times the average full-time salary. That's an amazing incentive to keep your employees well paid and happy. Turnover clocks in at just a third of the industry average. That's organic happiness, and it has translated into amazing capital appreciation for shareholders. The stock has been a five-bagger over the past five years.

What about the food-service industry? That burger-joint cashier wasn't exactly friendly when you asked him to hold the pickles last week, remember? Now think back to the last time you stepped into a Starbucks (NASDAQ:SBUX) and found a cheery barista ready to dispense your complicated latte order. What's the deal? Could it be because even part-timers at Starbucks receive comprehensive health-care coverage? Including hypnotherapy of all things? As fate would have it, Starbucks has been a 10-bagger over the past decade.

Just when they're breaking that first smile
In all of these cases, friendly personnel practices may mean little to you unless you're looking for a new job. That's because these stocks have already had their massive runs. As quality companies, they are still likely to beat the market, but wouldn't it be great if you could find these hire-happy outfits before they break out on their stratospheric market runs?

You can. Motley Fool Rule Breakers specializes in seeking out young companies that are rattling the cages of the way businesses are supposed to be run. The next great growth stock is already breaking the rules of mediocre business -- and happy employees are one indication of that.

That's why I think it's great that newsletter pick Provide Commerce (NASDAQ:PRVD) has a free, on-site fitness room to keep its employees active, close, and fit. If you like Genentech, you will love the fact that six of the newsletter's picks over the past year have come from the ranks of young and promising biotechnology companies. One of them is Protein Design Labs (NASDAQ:PDLI), where new employees are eligible for stock-option grants, a wide range of nationwide insurance coverage, and three weeks of paid vacation time. Another 10 days of paid sick days can be banked if they are unused.

These are the kinds of employee-first companies that won't crack the Fortune list for a few more years. When they do, how many times over do you think their shares will have appreciated? The potential is there -- and potential is exactly what our Rule Breakers team specializes in finding. You can even take advantage of our free trial subscription offer to check out the more than 20 companies we've found thus far.

Either way, pay attention the next time you're in the presence of employees who are part of a public company. Kick their tires -- not their shins. Are they happy, and will they help take the company to the next level? If so, what are you waiting for? You might want to be there, too -- as an investor.

Longtime Fool contributor Rick Munarriz is always a happy worker. However, according to his wife he remains privately held. He does not own shares in any companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.