Companies with more effective employee experience outperformed their peers for top-line growth, bottom-line profitability and return to shareholders
Arlington, VA (Nov. 18, 2019) – A new study by Willis Towers Watson, supported by advanced analytics, reveals for the first time a compelling and predictive link between employee experience (EX) and employer’s superior financial performance. The analysis is underpinned by a deep data source of employee feedback, including a survey of over 500 companies, close to 50 years of research and a total database approaching 250 million employees.
The study found companies demonstrating a strong EX consistently beat their sector on average by a clear margin of 2 to 4 percentage points (pp) across key performance metrics, including return on assets and equity, one-year change in profitability, and three-year changes in revenue and profitability. In contrast, companies delivering less effective EX consistently underperformed their peers by 1pp to 10pp.
“Our research shows that companies with a strong overall EX outperform their sector peers on top-line growth, profitability growth, and returns on assets and equity, not only in the short term, but over the long term too,” said Stephen Young, global practice leader, Employee Insights, Willis Towers Watson. “Meanwhile, companies with poor overall EX will likely underperform their sector. This confirmation that EX sits at the heart of delivering exceptional customer experience and superior financial performance has profound implications for human capital strategy.”
The study measured several performance metrics for companies, including return on equity, one-year change in gross profit and three-year revenue growth, per the chart below. It uncovered that, for each financial measure, companies with low EX scores had the poorest financial performance and companies with high EX scores were the best financial performers, for example:
- Return on equity: Low EX companies were 6pp below the index; strong EX companies performed 3pp above the benchmark.
- One-year change in gross profit margin: Low EX companies were 10pp below the index; strong EX companies performed 3pp above the index.
- Three-year revenue growth: Low EX companies were 1pp below the index; strong EX companies performed 4pp above the index.
“The world’s leading organizations increasingly focus on EX. We found the highest performing companies have a very strong focus on how their employees feel about the organization, from inspired by its purpose and trust in leadership, to confident in achieving career aspirations. These factors set organizations apart,” said Patrick Kulesa, senior research director, Willis Towers Watson Research and Innovation Center.
Willis Towers Watson’s employee surveys tap into all aspects of EX, from local conditions — such as training opportunities, immediate supervision and teamwork — to aspects of organizational functioning — such as senior leadership effectiveness, customer focus and company competitiveness. Evidence for the model was developed by examining an elite group of strong EX clients that are market-leading in financial results. This “high-performance” group represents about 30 companies annually.
What makes EX unique in the high-performance group are key aspects reflecting the mindset of employees in the best companies, e.g., feeling inspired by the company’s mission and purpose; being able to achieve one’s potential and career aspirations; having a deep sense of trust in senior leadership; and having a sense of drive through strong customer focus, and innovation and agility in meeting marketplace demands.
“The most significant change comes through a transformation of leadership mindset — inspiring your organization around your purpose, driving agility and innovation to be ahead of the market, helping your people achieve their potential and building a culture of leadership trust. The fact that so few organizations do this well suggests it’s hard. But it’s the ultimate magic key to unlocking high performance,” said Young.
Other elements of EX show little differentiation between the high-performance group and other companies, including the basic understanding of work goals and objectives; support for employee effort from local managers; and organizing work through scheduling and internal structures, efficient processes and workplace flexibility.
“Many of these workplace essentials occupy immense time and resources in organizations today. What our model says is these table-stakes are not unimportant but can distract employers from the true hallmarks of excellence. Our model directs employers to the specific factors of EX, which are the most important for predicting sustained financial performance,” said Kulesa.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
SOURCE: Willis Towers WatsonTags: customer experience (CX), industry first, Willis Towers Watson (WTW)