Doing Right By Workers Leads to Positive Financial Performance For Nvidia, Salesforce and Cisco
Many have heard the expression “employees are a businesses’ greatest resource” or some version of this sentiment. Very few, however, are able to explain how this is true because they lack the data. Therefore, most believe this sentiment is merely anecdotal. The how, however, is best explained by a favorite quote of ours that comes from Dave Bookbinder, “The value of a business is a function of how well the financial capital and the intellec-tual capital are managed by the human capital.” It would make sense then that companies that know how best to manage their human capital will outperform.
We wanted to know if this was true in practice. We wanted to answer: Do worker-friendly human capital policies and, in general, treating workers well benefit the bottom line? In other words, do businesses benefit financially from doing right by workers? What is the relationship between worker treatment and financial performance?
First, we needed to find companies ranked highly by their workforce. While determining which companies are truly the most pro-worker may seem difficult, various rankings exist of the best companies to work at. A few trusted, prominent names in this space include the nonprofit Just Capital’s Just 100, the workplace culture as-sessment site Great Place To Work, the employer recognition survey program Top Workplaces, and the anony-mous company employee experience review site Glassdoor’s Best Places To Work. The more best place to work lists a company appears on, the more likely the information is accurate. That is to say, the more likely it is that that company is truly worker-friendly.
Second, we dug into the human capital disclosure reports of these companies to reveal if, in fact, the companies reported their management practices and worker treatment, and the impact it had on their bottom line, in their human capital disclosures.
Lastly, we analyzed their financial performance over the period in question.
Our hypothesis, and our belief that fuels this body of work by our team at HumInt Labs, is that human capital, in fact, is a primary driver of a company’s financial performance, as explained nicely by Dave Bookbinder. Now, the data.
Top Worker-Friendly Companies
While not exhaustive, there are a few companies that stand out as they appear at the top of multiple lists of best places to work.
One company that ranks very high in the rankings of the best workplaces is Nvidia. Nvidia #2 in Just Capital’s overall 2023 rankings, #5 in both Glassdoor’s Best Places to Work in 2023 and Fortune 100 Best Companies To Work For. That’s three separate ranking methodologies in which Nvidia places in the top five — clearly an im-pressive performance. A statistic that especially stands out is Great Place To Work’s finding that 95% of Nvidia employees say the company is, indeed, a great place to work. Notable as well is Just Capital’s Workers ranking, which assesses “how a company invests in its employees”, in which Nvidia is fourth overall. In addition, em-ployees are to have reported that “the culture of the company” is “inclusive and encouraging.
Another company making the top of lists is Salesforce, coming in at the #4 spot by Fortune, #13 overall in the Just Capital rankings and making an appearance on Glassdoor’s rankings. Salesforce is said to be a great place to work at by 90% of employees, with 92% saying the business practices of management are honest and ethical.
The third company in this study, but certainly not the last, is Cisco, taking the #1 spot in the Fortune 100 Best Companies To Work For. A slew of impressive data points for Cisco includes 96% of employees saying Cisco is a great place to work, 97% believing that management is honest and ethical, and 98% agreeing that they can get time off when needed. Cisco also makes the top 50 for both Just Capital’s assessment of business behavior and Glassdoor’s employee-driven rankings.
Examining Human Capital Disclosure Reports
The next matter to examine is what these companies revealed about their human capital practices in their man-dated human capital disclosures to the SEC. While there are plans for the SEC to tighten reporting requirements, currently businesses are still allowed broad latitude in what they include in their annual human capital disclo-sures. Rather than prescriptive, the requirements, as explained by Bloomberg Law, followed a “principle-based methodology,” essentially meaning companies can choose what to report.
However, from the perspective of anyone interested in how companies treat workers and assess human capital, these relatively lax, principle-based rules have an advantage. Since businesses are required to report relatively little, what is or is not reported offers insight into a business’s attitude about their workforce and human capital. A company that voluntarily includes ample information on their human capital practices likely has a genuinely worker-friendly set of policies. Let us see if our hypothesis is correct by analyzing the human capital disclosures of our three companies that made the top of best places to work lists.
In its annual filing with the SEC, Nvidia has a specific section on human capital management. Notably, there is an entire subsection devoted to development and retention, in which the company describes the training options available. On offer are “opportunities to learn on-the-job through training programs, one on one coaching, and ongoing feedback,” as well as “live and on-demand learning experiences that include workshops, panel discus-sions, and speaker forums.” Employee career development methods such as these are key aspects of effective human capital development, and are certainly pro-worker. Also mentioned in the report are the methods used to “evaluate employee sentiment and engagement,” namely “pulse surveys, a suggestion box, and an anonymous third-party platform.” Practices of this sort allow for anonymity permitting employees to speak honestly without fear of retaliation. Perhaps, more important is that fact that these feedback loops demonstrates the company val-ues employees’ diverse voices. This, in turn, increases psychological safety which leads to increased engagement and productivity. In addition, Nvidia reports a low annual turnover rate — of 5.3% in fiscal year 2023 — which is further evidence the company is doing right by its employees. Additionally, Nvidia offers support for “a hybrid work environment, understanding that many employees want the flexibility to work in the office or from home,” which indicates the company is keeping up with the evolving expectations of the modern workforce.
As for Salesforce, in the company’s recent annual filing with the SEC, in the human capital management section, the company states that they “believe our company culture fosters open dialogue, collaboration, recognition and a sense of family, all of which allow us to attract and retain the best talent, which is critical for our continued success.” This is at least the right attitude for a company to take. In addition to culture, Salesforce has a specific program, called Greater Leader Pathways, for leadership development. Impressively, “in fiscal 2023, approxi – mately 24,000 employees enrolled in Great Leader Pathways.” Such a large number participating is evidence that the program is of genuine value to workers at Salesforce. Perhaps as important, Salesforce offers “yearly educa-tion reimbursement to employees who wish to continue job-related education from accredited institutions or or-ganizations.” Finally, Salesforce offers Trailhead, a “learning platform available for all employees, in-person and virtual classes,” and “guides and workbooks.” This is an example of doing more than just adopting the right rhetoric — this reimbursement policy represents a genuine economic investment in employees. Talent and career development is a cornerstone of quality human capital management, as upskilling increases human capital value, employee engagement, and the potential for greater organizational performance; all of which lead to increases in company performance and valuations. Salesforce also assesses its human capital via an employee opinion sur-vey, which turns up results such as that 90% “of responding employees indicated that they feel a sense of pride working at Salesforce.” Data like this indicates that the company is doing a good job in its human capital man-agement efforts.
Cisco, for its part, includes plenty of relevant information in its annual filing with the SEC, as well as more ex-tensive data and facts in its 2022 Purpose Report. The company adopts what they call its Conscious Culture, which means, they state, that “we act with dignity, respect, fairness, and equity in our interactions with one an-other.” In the area of employee development, Cisco’s filing explains that employees are encouraged to have a “self-directed,” independent approach to career development. Employees are allowed to “choose their own career paths,” with the company “providing them with tools and resources to help them achieve their career goals.”
Granting employees latitude in determining the course of their career is a good example of employee empower-ment. Cisco has another initiative around employee wellbeing and happiness that is worth highlighting, the Cisco Check-In. Started during the pandemic, the Cisco Check-In has “since evolved into a forum where we can dis-cuss much more with our employees, from business updates to social justice to physical and mental health.” Putting a focus on mental and physical health is certainly an example of a company orienting itself in a pro-worker, employee-first manner. Cisco also has implemented multiple surveys in which employees can “provide confidential feedback on our culture, company strategy and trust in their direct leaders”.
The Financial Performance of Nvidia, Cisco, and Salesforce
What about the bottom line? Are these three companies as strong financially as they are in investing and treating workers well? A look at the data affirms, yes, they are financially healthy.
For Nvidia, a recent article from Markets Insider points to the strong performance by Nvidia’s stock, which is said to be one of the “sizzling rallies” characterizing a recent “growth-stock surge.” In fact, Nvidia’s stock is do-ing so well that it is “the best performer in the S&P 500 index so far this year, soaring over 80%”.
Next, recent news reports highlight how strongly Salesforce’s stock is performing. Besides producing “better ad-justed earnings than expected in the fourth quarter,” MarketWatch reports that “Salesforce shares have been on a tear this year, as activist investors have piled into the stock in unprecedented fashion.” Furthermore, “big profit gains” are expected this year, while, about the last year, Chief Executive Marc Benioff said Salesforce revenues were “up 18% year-over-year, or 22% in constant currency, one of the best performances of any enterprise soft – ware company our size.” It deserves noting that at the time of this writing, Marc Benioff announced a return to office mandate for its workforce. Time will tell what impact this has on employee engagement, organizational performance and company financial valuations. Our predictions are it will not be good.
Data on the last company in our study finds that Cisco is a financially strong company as well. Cisco’s most re–cent financial report, for quarter two of financial year 2023, shows the company has revenues that are up 7% year-over-year, a positive trend. Meanwhile, the company’s stock has been performing well too. According to a Yahoo Finance article, Cisco’s stock has “increased by 2.8% over the past month.” Furthermore, over the long term, Cisco is performing strongly, with an “exceptional 21% net income growth seen over the past five years.”
The Relationship Between Human Capital and Financial Performance
The implication of all of is clear. The plain conclusion is that treating workers well, exemplified in robust human capital disclosure reports, is good for the bottom line. While companies have a moral and ethical duty to treat workers well, they now have evidence that doing right by workers leads to positive financial performance, which makes it a fiduciary duty to do so.
After all, a satisfied, motivated workforce is a key component of high productivity. Alternatively, employees who are chronically dissatisfied and unmotivated will not put forth their best effort. Turnover will be much high-er in a company where workers are treated poorly as well. Retaining top talent is almost impossible if a business does not treat its employees the right way.
As for the role that human capital reporting plays in all this, human capital reporting is itself a key aspect of properly investing in human capital. Human capital can seem to be something amorphous and hard to define — human capital reporting is all about correcting this misconception by generating hard data. Upper management can only get a proper look at the state of their workforce — whether in the dimensions of motivation, job satis-faction, skills, or knowledge — via a robust human capital reporting system. Putting more resources into human capital reporting is a concrete way for companies to prioritize their workers, which are, after all, ultimately the source for any company’s success. Additionally, human capital reporting is necessary, as per the SEC, for com-panies to demonstrate to their investors that they are delivering on their fiduciary by doing right by workers.
While the business world is often stereotypically thought of as a cold, harsh world where workers and manage-ment are in opposition, the examples of Nvidia, Cisco, and Salesforce are a valuable reminder that, in truth, treating workers well is in alignment with achieving excellent financial results. Since human capital reporting is itself crucial to treating workers well and managing human capital properly, this makes finding quality human capital reporting solutions key for every business today.
Written and Researched by Anton Platt
Commissioned and Edited by Hason Greene