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Great Workplaces Perform Better Financially

Research

To evaluate the investor value created by the great workplaces as compared to the constant market rate of return, we have used the Reinvestment Model and the Hold Model in this research report. Results of these reinvestment and hold model have then been compared to the BSE Sensex, NSE Nifty 50 and CNX NIFTY – Total Returns Index points on the 1st trading day of July for the same period. We have compared total cumulative returns over the period under consideration. Dividends, Split of shares and Bonus issued by the companies to shareholders during the year have been accounted for. Right issue of shares has not been accounted for as it requires additional investment. Transaction and other incidental costs have been ignored while calculating the return on investment.

REINVESTMENT MODEL
Under this model, an amount of Rs. 1,00,000 is equally invested on the first trading day of July 2008 into equity shares (at closing price) of listed Great Workplaces as per the published list. The Year on Year (YOY) effect of split, bonus and dividend is captured. The portfolio is liquidated after year-end i.e., on 1st July 2009 (& subsequently each year) and the proceeds together with dividend earned are reinvested equally in the new published list of Great Workplaces issued annually. This investment strategy is repeated every year till June 2016.

HOLD MODEL
Under this model, an amount of Rs. 1,00,000 is equally invested on the first trading day of July 2008 into equity shares (at closing price) of listed 9 Great Workplaces as per the published list of 2008 and is held up to 2016. The Year on Year effect of split, bonus and dividend on the invested shares is captured. The total return at the end of the period of 8 years includes market value of the shares as at 1st July, 2016 together with split, bonus and amount of total dividends earned during the period of 8 years.

CONCLUSION
The Reinvestment Model illustrates that Great Workplaces consistently outperform major stock indices such as BSE Sensex 30, Nifty 50 & CNX Nifty – Total Returns Index over a period of time. During our study of share market performance of listed Great Workplaces, we observed that Reinvestment Model made a Year-on-Year (YOY %) Return on Investment of 22% in 2015-16 generating a cumulative return on the initial investment of 508% in past 8 years. At the same time, Hold Model made a Year-on-Year (YOY %) Return on Investment of 37% in 2015-16 generating a cumulative return on the initial investment of 534% in past 8 years. The Hold Model, which is more of a conservative approach to the investment also, concurs with the linkage between being a great workplace and financial performance. Thus, we infer that companies that are identified as great workplaces by Great Place to Work® Institute continue to show a positive correlation with returns provided to shareholders. The current study reveals that great workplaces have outperformed major stock indices by a factor of 4 and have yielded 5 x returns on the initial investment.

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