Lawrence A. Cunningham’s Quality Investing: Here’s what happens when employers see workers as investors — not ‘family’ or ‘teammates’
Investors prefer that corporate managers see employees as investments and partners in the business. But many people today reflect employee relations through political, metaphorical or even antagonistic eyes.
The tight labor market, plus the coronavirus pandemic’s reshuffling of people’s priorities and flexible workplaces, has empowered employees. Employee turnover is up across industries; large numbers of senior staff are quitting and junior staffers expect more from a job than good pay and basic benefits. What were once perks — work-life balance, flex time, and remote options — are now mandates.
Employers’ response to employee demands vary, from outright rejection to complete acquiescence, with neither being ideal for shareholders. Some employers cater to particular employees by adopting political identities, such as Dish Network
or Patagonia on the left and Duke Cannon and Molson Coors Beverage
on the right. Politicizing a firm can be a good economic strategy in certain industries and is more tolerated than it once was. But in most sectors, political pandering is not value-creating, as it slashes addressable markets.
Others try to escape ideology. For example, Basecamp banned political talk among staff and Coinbase Global
renounced social activism by the firm. But in each case, some employees felt alienated.
If polarizing positions are unappealing to investors, consider that some companies are explicitly investing in what employees value. For instance, KPMG, a perennial winner in employee satisfaction, recently announced expanded employee benefits that reflect investment in both employees and the firm.
KPMG will make direct firm contributions to the 401(k) rather than limiting them to matches of employee’s own contributions. The company is reducing employee health-care premiums by 10% without changing benefits. It now grants new parents 12 weeks of paid leave (up from two- to six) and separately offers another three weeks for employees needing to handle other caregiving roles.
KPMG CEO Paul Knopp wrote: “As a firm, we grow best when our people are growing too. . . . We’re committed to continuing to invest in our extraordinary people — their careers, their future, their well-being and their families.”
Across the board, employees continue to share the investment perspective when it comes to the benefits that increase their satisfaction. For instance, in a recent compilation of 10 highly rated employers, employees at all but one prized 401(k)s, profit sharing and equity incentives — features that align with shareholder interests. They also cited benefits that reflect new expectations from the workplace, a majority mentioning free meals and social events, and many noting new-parent leave, college tuition benefits, and charitable gift matching.
This approach seems right for a society that continues to look to the private sector, not government, to generate resources for people. Even as Washington explores ways to thicken the social safety net, it’s corporate America that provides life-changing benefits to most Americans.
Such benefit innovation arguably meets the market and societal changes without wading into politics. And while the KPMG-type approach appears astute, it’s more old-fashioned than fashionable and conventional than contemporary. It is adaptive, not revolutionary.
After all, the best companies never put shareholder profits above all else, and certainly not above employee well-being. Nor have they prioritized employee happiness, as opposed to satisfaction. Simplistic measures such as worker turnover do not bother good companies, because to produce the most satisfied and productive workforce, dissatisfied or unproductive employees should leave a firm.
Such realities underscore the difficulty some CEOs face in defining their firms from an employee perspective. Many talk of their firms as families, but few take that seriously as it would inhibit the flexibility needed to let go of those who should leave. Others, such as Netflix
speak of their employees as teammates, which might apply in some settings but can obscure the value of internal competitions and individual initiative . Other companies identify as a community or a village, yet these likewise portray the workplace as something it’s not.
We already have the word CEOs are looking for: company. The medieval origins of the word refer to how merchants and investors joined together (com = together + panis = bread), taking risks and thinking jointly about returns. Today’s managers would do well to embrace such an investment concept to keep employees and shareholders algined.
Lawrence A. Cunningham is a professor at George Washington University, founder of the Quality Shareholders Group, and publisher, since 1997, of “The Essays of Warren Buffett: Lessons for Corporate America.” For updates on Cunningham’s research about quality shareholders, sign up here.