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CFO memo: If your employees aren't happy, your shareholders won't be, either

  • Companies with a highly engaged workforce outperform their peers by 147 percent in earnings per share, according to Gallup.
  • Over the past five years, publicly traded firms in the 2017 Fortune 100 Best Companies to Work For list posted a mean annual return of 19.7 percent vs. 14.6 percent for the S&P 500.
  • Eighty-two percent of respondents to Deloitte's 2016 Global Human Capital Trends survey identified culture as a potential competitive advantage.

The culture of Silicon Valley companies has made a lot of highly debated headlines lately, underscoring the need for everybody to push for and safeguard positive employee experiences.

Historically, culture has been the purview of CEOs, company founders and human resources. In progressive companies, that's no longer the case. Employees and leaders in all parts of companies, including CFOs, are playing an increasingly important role in sustaining, crafting and propagating positive experiences.

Why? Here's one underappreciated reason: Culture drives financial results.

From my seat as CFO of Workday, a Silicon Valley technology company that has been fortunate to be recognized as a top workplace by Fortune, I've witnessed the impact of positive cultures.

Workday co-founders and co-CEOs Aneel Bhusri (left) and Dave Duffield (center) applaud their company's first trade after their IPO at the New York Stock Exchange on Oct. 12, 2012.
Brendan McDermid | Reuters
Workday co-founders and co-CEOs Aneel Bhusri (left) and Dave Duffield (center) applaud their company's first trade after their IPO at the New York Stock Exchange on Oct. 12, 2012.

Research clearly shows that positive cultures — whether in tech or in other industries — can benefit the bottom line in various ways.

1. Happier employees

Companies with a highly engaged workforce — which is likely to include employees who feel a sense of belonging, ownership and accountability — outperform their peers by 147 percent in earnings per share, according to Gallup, which has been tracking employee engagement for decades. Companies with positive cultures will also get more out of their recruitment and retention investments because they'll have less turnover.

On average, companies on the 2016 Fortune 100 Best Companies to Work For list experienced 50 percent less voluntary turnover than their peers. The war for talent in today's knowledge-driven economy is intense. Once a company has hired the best talent, it is critical to keep those employees engaged in the company, its mission and their own personal growth.

2. Happier customers
This is key to company longevity. Without happy customers, growth is harder. Companies will have to invest time and resources to win new customers as older ones grow disenchanted and fall off. Here, too, employee engagement is key. Employees are in the bunker, day in and day out, partnering with customers. If two vendors offer the same product but have very different cultures that impact the employee experience and how that translates to customer engagement, customers will often pick the vendor that's perceived as having the better culture. Other leaders have also recognized the power of culture in business competition. Eighty-two percent of respondents to Deloitte's 2016 Global Human Capital Trends survey identified culture as a potential competitive advantage.

3. Happier shareholders
Business conditions — and stock prices — can and will be affected by all kinds of macro-economic conditions and cycles. But research also shows that having happier employees and happier customers can result in driving shareholder value.

For 30 years the research and consulting firm Great Place to Work has studied the impact of culture on company performance. Its data shows that over the past five years, publicly traded firms in the 2017 Fortune 100 Best Companies to Work For list posted a mean annual return of 19.7 percent vs. 14.6 percent for the S&P 500. Every public company, and every CFO like me, cares about investors and how they view the potential of their investments. Culture that drives shareholder value extends the positive stuff that happens inside a company to the broader world.

What should a CFO do?

CFOs have a particularly critical role to play in culture. Traditionally, we've focused on finance while HR focused on people. That leadership approach is no longer optimal. In today's knowledge-based economy, people are often a company's biggest expense and asset.

As CFOs, we make decisions all the time that directly affect the people who work with and for us. That can include the quality of facilities and workplaces and the appeal of employee programs, benefits and training opportunities. These investments can positively or negatively impact culture and play a big role in whether employees feel valued by the company. Employees who do are likely to be more engaged and more productive. As such, the investment decisions we make will have long-lasting and deep ramifications to culture and, thus, to company performance.

CFOs also have intimate knowledge of all the company's financial data, including that around employee retention and pay parity. We can access data to identify where and when we need to make changes to positively impact our employees' experience. Companies win business by being proactive with customers, by anticipating their needs. The same attention to detail is invaluable when addressing how best to retain and motivate one's own employees.

Finally, CFOs have a seat at the executive table, and while CEOs, as noted recently by Deloitte analyst Ajit Kambil, "need to own the narrative and be the champion of company-wide culture change," she or he will need help. "The entire C-suite can play a vital role across the culture change steps," Kambil wrote.

I couldn't agree more. All executives play a vital role in crafting, supporting, changing and maintaining a company culture. Because of our position as leaders, we're naturally closely watched by other employees. What we do and how we act as leaders — good or bad – ripples throughout the organization.

No doubt technology, like so many other industries, faces cultural challenges and opportunities for improvement. Meaningful changes that stand the test of time will require an all-hands-on-deck approach, especially from the C-suite. But it will be worth it, not only for employees but for customers and investors, too.

Today's greatest companies succeed by helping all of their stakeholders thrive, concludes the authors of the book Firms of Endearment. Such companies "make the world better by the way they do business and the world responds," the authors note.

The data clearly shows that positive cultures are winning cultures. Employees that feel valued, empowered and set up for career growth will be more engaged and productive, and they'll positively impact the customer experience. From that, companies will yield better results and business success, and culture will have been a key reason.

By Robynne Sisco, CFO at Workday and member of the CNBC Global CFO Council