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January 30, 2014

Invest In Your Employees For Better Returns

by Craig Shapiro

Artwork by Hiking Artist

In a recent New York Times article, Adam Davidson talks about two very different trips he took to Ikea five years apart from one another.  

Why so different?

In between the trips, Ikea invested in improving the working conditions and opportunities for their employees. And not just for the sake of the employees, but also because the investment can lead to increased profits.

The research backs this up. New employee management software draws on the work of academics like MIT Sloan professor Zeynep Ton. She’s found that the relationship between worker management and profit should not be focused simply on decreasing employee costs.

In fact, the opposite is true according to a study by Wharton professor Marshall Fisher. In the case of one retailer, every every dollar of increased wages brought in $10 more in revenue. For smaller stores, that figure jumped as high as $28.

Davidson breaks it down:

“Even the most coldhearted, money-hungry capitalists ought to realize that increasing their work force, and paying them and treating them better, will often yield happier customers, more engaged workers and — surprisingly — larger corporate profits.”

Businesses that align the incentives of all stakeholders — founders, shareholders, employees, customers, community — are finding that the extra costs that go into the business are yielding impressive returns. Studies like these, which we expect to see more and more of, only reinforce that this is where businesses are headed. And that’s a movement we’re excited to be a part of.

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