The Case for Work-Life Programs
Posted on Strategy Freek: April 13, 2009 7:20 PM
"Work-family human resource initiatives." Sounds rather soft and fluffy, doesn't it? Guess it does. It concerns stuff such as on-site childcare centres, flexible work arrangements, family stress initiatives, and other similar efforts.
You can almost hear a response from some corners of the corporate conversation: "Which tough, self-respecting corporation would want to be associated with that?" Sometimes, thankfully, you can hear that conversation progress: "I guess it might actually help you become a more attractive employer, which should ultimately help your performance. Hey, even the stock market might appreciate such a thing, right?"
Some time ago, Professor Michelle Arthur, from the University of New Mexico, set out to examine stock market reactions to the announcement of Fortune 500 firms adopting such work-family initiatives, which she collected from the Wall Street Journal. For example, one of them said "IBM began a childcare referral service for its employees" or "Procter & Gamble are broadening the scope of their family-friendly policies", etc. She found 231 of them and then, for each, tested the stock market reaction to the announcement, through what in statistics is known as an "event study."
The results were clear. In the early 1980s, the stock market would hardly react at all to such fluffy initiatives; if anything the effect of the fluffy announcement on a firm's share price was slightly negative (-0.35%). However, that changed quite a bit in the 1990s when the announcement of a work-family initiative resulted in a positive swing of the stock- on average 0.48%. Now that may seem peanuts to you, but if you're a $5 billion company, it means that even one such initiative could increase the value of your firm by 24 million. That's a lot of peanuts. And a lot of share-holder value.
I've long thought that, for example, an investment bank that could come up with a formula allowing people to have a real career without working 70 hours or even 5 days per week should be able to turn that into a material competitive advantage. It actually doesn't seem that hard to do. But macho culture and self-delusion - and not much else - seems to always stand in the way of developing such a practice. What Professor Arthur's study suggests is that such firms are simply stuck in the 1980s; nowadays even the stock market recognizes the sheer monetary value of work-family initiatives.
Time to wake up I'd say, and join the new millennium. Because if you don't, you're actually destroying shareholder value, and that's not a very macho and serious thing to do now is it?