Do the Best Employers Make the Best Investments?


Are you happy working for your current employer?

The Straits Times and global research firm Statista have recently published their findings on Singapore’s best employers for 2021. Over 9000 employees based in Singapore were surveyed last year between August to September and a total of 1700 eligible employers rated across 26 industries.

In this article, we will find out why employers are focusing more on employees’ welfare and most importantly, can investing in the best (listed) employers deliver better returns for investors like us?

Before that, let us take a look at the survey results.

Best companies to work for in Singapore

The survey was conducted via an online panel organised by Statista and on The Straits Times’ website.

To rate the companies, respondents were given around 30 questions on a range of topics. These included their salary, work-life balance, work environment and also opportunities for development in the companies.

At the core of each question, respondents were asked to rate the willingness to recommend their employer to friends and family on a scale of 0 to 10, where 0 meant “I wouldn’t recommend my employer under any circumstances” and 10 meaning “I would definitely recommend my employer”.

Responders who had experiences in a former company or have close relatives working there was also given the opportunity to evaluate those companies.

In total, more than 200,000 evaluations were collected from 9000 employees working with one of the 1700 eligible employers across 26 industries. (Companies should at least have 200 people employed in Singapore to be considered for this ranking.)

Here are the companies that made it to the top 10 in 2021.

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Source: Statista

It was also great to see that 70% of the employers on last year’s list of 150 best employers were also on this year’s list. This suggests that companies in Singapore are managing well even during the pandemic last year.

According to the survey, some good practices was pointed out. Amazon (AMZN) for example conducts daily polls to gauge employee sentiments in real-time. In addition, the company is planning to invest about S$5.4 billion in Covid-19 related initiatives globally to get its products and services to customers while keeping its employees safe. Another company, Siemens recognises and rewards its employees’ hard work through a mobile-enabled app where accumulated points can be used to exchange for gifts and vouchers.

If you are curious if your company has made it to the list, click here to find out.

These employers were also segmented into 26 industries, as such, you could compare companies from a particular industry to see how a company performed compared to their peers.

Good Investment opportunities?

Well, this is an investment blog so let’s take it one step further and see if the top companies perform better as compared to their peers in terms of investment.

Studies have shown connections between employees’ happiness and the company’s performance. For years, employee’s engagement and wellness were not considered an integral part of a business strategy. However, it is getting clearer that a disengaged workforce is a drag to a company’s productivity and innovation. On the flip side, a company that cares about their employees and consistently engage with them usually see higher job satisfaction that inadvertently led to better business performances.

As such companies are putting more focus on creating a better environment for their employees now more so than ever. Not convinced how caring for its employees leads to better performance for the company? Here are some reasons why:

More productive workforce

When an organisation makes employees’ engagement central to their business strategy, its focus is to make employees feel passionate about their jobs and committed to the organisation. This is done through various ways like understanding its employees, creating a workplace environment free of fear and also encouraging personal development. As a result, employees of these companies usually show up every day to work with passion, a sense of purpose and a high energy level.

According to findings by Gallup, companies with a high level of engagement reports 22% higher productivity. In dollar amount, Talent Culture also found that increasing employee engagement investment by 10% can increase profit by $2400 per employee per year.

Ability to attract and retain workers

Companies that support wellbeing initiatives are more likely to attract and retain the best employees. According to a report by the American Psychological Association, organisations, where their senior leadership have shown commitment to the well-being of their employer, are more likely to be recommended to others. (89% vs 17%) Among all the employees surveyed, there was also a lower proportion of employees planning to leave their job in the next year. (25% compared to 51%)

This is an important factor as there is a limited supply of talents to go around. As such, companies have to compete with each other for the best and brightest talents in the field. Failing to attract and retain them in the company could affect its future growth as its peers compete with it.

Diverse perspective

Companies that care about their employees, more often than not values everyone’s opinion down to the newest member in the team. By ensuring all its employees’ voices are heard, employees are 4.6x more likely to feel empowered to perform their best work, according to a study by Salesforce.

In addition, such companies also embrace greater gender and ethnic diversity. With these two factors, companies that listens to its diverse employee pool, consistently outperformed its peers as a wider range of perspectives are considered in the decision-making process.

Case Study: Google

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Let’s take a look how these factors come into play and helped Google, the company that was ranked the best employer of 2021, reach where it is today.

If you have friends working for Google, you may have heard of the various perks they receive as an employee. Apart from high salaries, some additional perks include access to massage rooms, gyms, nap pods, laundry services, hairdressers and even mechanics for your car on site. In its Singapore office, Google also provides employees with a mother’s room to cater to mothers, a physiotherapy centre, manicure salon and also game rooms for employees to destress. Hungry after being drained mentally? Employees also have access to pantries filled with healthy snacks and drinks. Not only that, breakfast and lunch are provided for free every day with a variety of options to choose from. (Dinner is not provided so to encourage work-life balance) It is not surprising this tech giant receives more than a million-job application each year with only a few thousand making the cut. Not only do highly talented professionals want a spot in this companies, students from top universities are known to compete for Google internship programmes worldwide with over 100,000 applications each year.

Do Best Employers make Best Investments, according to data?

So, do these well-loved employers have really perform better? Can we really pick stocks based on the top employers of the year?

To determine if this is a good criterion in picking our stocks, let’s look at how the world’s best employers of 2017 performed so far in terms of share price.

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So, how did the best employers across different stock markets perform?

US Market (S&P 500 as benchmark indicated in purple)

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In the US market, Alphabet (Rank 1), Microsoft (Rank 2) and Apple (Rank 4) have outperformed the market benchmark tremendously. On the other hand, IBM (Rank 8) and Williams (Rank 7) had underperformed and produced a negative return.

Japan Market (Nikkei 225 as benchmark indicated in blue)

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In the Japanese market, Japan Exchange Group (Rank 3) had also outperformed the market benchmark.

German Market (DAX 30 as benchmark indicated in blue)

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In the German market, Daimler AG (Rank 6) while it recovered at a much faster pace during the Covid-19 crash, it is still underperforming compared to the benchmark.

Korea Market (KOSPI as benchmark indicated in blue)

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In the Korean market, LG Corp (Rank 10) had barely outperformed the benchmark.

Stockholm Market (OMX 30 as benchmark indicated in blue)

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Last but the least, in the Stockholm market, Investor AB (Rank 9) had outperformed its benchmark by quite a huge margin.

Promising Trend with some caveats

All in all, from the stock price charts of the top 5 companies of 2017, 4 out of 5 outperformed their index with the exception of Noble Energy*. This is quite impressive!

But wait, there’s more. If we were to look at the top 10, only 6 outperformed their respective market index, the other 4 companies namely Noble Energy, Daimler AG, Williams and IBM have underperformed with some giving a negative return.

*Noble Energy an independent crude oil and natural gas company was acquired by Chevron Corporation in 2020 during the midst of the pandemic. Prior to this deal, the company share has underperformed tremendously.

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Source: The Motley Fool

Among the companies that have underperformed, you may observe a secondary trend. Apart from IBM, a technology company, the other 3 companies that underperformed has businesses that are cyclical in nature.

Both Noble energy and Williams’ core business are in oil and natural gas which has not been doing well over the years. Daimler AG, a premium car manufacturer known for its Mercedes Benz cars is also experiencing a slower car growth due to weaker global demand.

IBM was the only exception. While other technology companies performed extraordinary over the past years from the rising demand for digitalisation, IBM stock performance has been lacklustre. Under Rometty’s leadership, it was the only US tech company valued at $100 billion to have lost value.

Many factors could have come into play, but a contributing factor came from bad business decisions IBM made over the years which cause it to lose its market shares to its rivals like Google, Apple, Amazon and Facebook.

Conclusion

Looking at the best employer of the year could be a good starting point to identify potential companies to analyse. Nonetheless, we should not base solely on this criterion to decide if you want to invest in a company.  As shown above, no matter how well a company is doing now, other factors like whether the company is in a declining industry, do they have a good leadership team and much more come into play.





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