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Hiring Trends and Earnings

Posted by Jeff Pelliccio on Jun 7, 2017 9:00:00 AM

In ICS insights

Although it seems simplistic and even cliché to say so, companies do need to spend money to make money. Without the right number of workers, and certainly without the right number of skilled and motivated workers, most companies will struggle to reach their earnings targets.

Going further than just hiring additional employees to create future growth, many companies are adding to their rosters in anticipation of future growth they believe is coming to their industry, or to their geography.

When slowdowns are looming, hiring follows suit. Earnings forecasters are attuned to this, looking for inflection points that show companies are keeping employment spending in check. Of course, anticipating slower sales ahead is just one reason a company’s spending might have slowed down, however it can be telling and it can be a reason for analysts to urge caution.

According to Moneyball Economics, there is just one reason companies increase their spending: because their businesses are growing.

Not Just More Employees, but What Companies Do with Them

Of course, a company that increases hiring but doesn’t pay attention to the employer/employee relationship, or do anything to foster satisfaction, isn’t likely to see a long-term earnings increase.

Management consulting firm McKinsey took this earnings/employment correlation a step further by evaluating how the earnings of hundreds of companies were related to nine key areas that support organizational excellence.

The study found “… a strong linear relationship between organizational and financial performance” for an organization’s capabilities, defined as “sufficient internal skills and talent to both support the company’s strategy and create a competitive advantage.” Staffing agencies that place skilled workers, then, can play an integral role in helping companies improve their financial performance.

Another area analyzed in the survey was whether employees understand where the company is going and how to get there, and how well they are aligned with that direction. Not surprisingly, the study also found a strong correlation with earnings.

Other areas that were strongly tied to an organization’s financial success were how well a company holds its workers accountable for business results, how well the company is able to generate innovative ideas and adapt to change, and how closely a business keeps its finger on the pulse to measure and report business performance and risk.

What about Employee Motivation and Satisfaction?

The McKinsey study referenced above did not find a strong linear relationship between employee motivation/satisfaction and a company’s financial performance. However, as stated in a Harvard Business Review article, an analysis of 28 years of stock market data paints a different picture.

In fact, companies with the highest levels of employee satisfaction outperformed companies with less satisfied workers by as much as 3.8 percent per year in long-run returns. What’s more, the study found a causal relationship. That is to say that motivated and satisfied workers are what drove the earnings, not the other way around.

However, the study did note that it can take the market years to incorporate and react to employee satisfaction data from employee-friendly companies, primarily because there is such a focus on profits and dividends and other tangible data.

With a wealth of data that supports the other benefits that come from a satisfied and motivated workforce, such as higher retention and lower turnover, employers can’t go wrong by striving to keep employees happy and engaged.

Hiring the Right Skilled Workers is a Key Step on the Path to Reaching Earnings Goals

When you are ready to increase your workforce to meet anticipated future demand, rely on Infinity Consulting Solutions.

With expertise in helping firms with the accounting and finance, legal and compliance, information technology, and corporate support functions, we are different from general employment agencies. We have the connections, and the industry knowledge, to bring the right candidates to the table.

To learn more about how ICS staffing solutions can help improve your company’s bottom line, contact us today to be connected with employment professionals in any one of our eight offices nationwide – New York, Washington, D.C., Fort Lauderdale, Chicago, Dallas, Houston, Minneapolis and Denver.

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