Why Employee Wellness Matters for Investors

29 June 2021
3 Minute Read

During the pandemic’s darkest days, many companies rediscovered the importance of ensuring employee well-being. Now, investors need to develop research tools to evaluate wellness as a business differentiator that can provide important insight on a company’s outlook.

Keeping workers happy is challenging in the best of times. Yet when businesses around the world shifted into remote-work mode, it became even harder. Without daily face-to-face interaction, managers struggled to monitor distress signals. Suddenly, a personal situation at home might affect a worker’s ability to operate remotely. As lockdowns blurred work-life boundaries, staff needed encouragement to switch off after hours and stay fit. Physical and mental health issues required special sensitivity. And for jobs that could not be done remotely, workers faced enormous personal stress and the prospect of losing their livelihood, while companies coped with an entirely different set of hardships just to keep businesses running.

Companies are increasingly aware that investing in wellness is a cost-effective way to maintain a motivated and efficient workforce. But since the benefits are hard to quantify, investors are only beginning to incorporate employee wellness evaluations into stock-selection processes. We believe that measures of well-being will become more commonplace for investors, as an indicator of a company’s ability to retain and attract top talent—and to deliver better results over peers.

So how can investors gauge the state of mind of a company’s workforce? We think two complementary approaches can shine light on wellness. Big data techniques can help investors dig deeper into employee sentiment, helping to confirm and support qualitative assessments. And engagement with management can provide opportunities to get answers to tough questions about whether a company is providing employees in all types of jobs with the right conditions to deliver success.

Mining Employee Reviews with Big Data

Online employee reviews are a window into staff sentiment. Websites like Glassdoor, Indeed, and Comparably can provide an anonymous outlet for employee feedback on what goes on behind closed doors at work. However, employee reviews are generating mountains of data that are not easily deciphered. By using big data techniques such as natural language processing and sentiment analysis, investors can mine employee reviews to find out what attributes are most valuable in fostering loyalty and job satisfaction. Happy employees are more committed—and more likely to recommend their company to others.

Committed employees are a valuable source of human capital, which helps company performance, especially given the importance of intangible assets like intellectual capital. And spending on wellness and benefits is also a signal that a company is confident about its future cash flows, much like dividend payments.

We used natural language processing of millions of employee reviews to assess employee feedback in different sectors from several angles: company recommendations, compensation and benefits, work-life balance, diversity, and safety (Display). Our research suggests that in sectors where employees are generally satisfied with their compensation, they are more likely to recommend their company to peers.

Work-life balance, however, is even more important than pay for many employees. Our analysis shows that sectors with the strongest recommendations were also those in which the employees felt best about work-life balance. Taken together, we believe that these two trends suggest improving work-life balance may be an even more cost-effective route for companies to strategically cultivate loyalty than paying higher wages. 

What Fosters Positive Sentiment Toward an Employer?

Past performance and current analysis do not guarantee future results.
Based on employee reviews posted on Glassdoor for S&P 500 companies from May 2020 through April 2021. After scraping the reviews, we examined the raw text using natural language processing to derive themes such as work-life balance, diversity and safety. Our analysis also aggregated the scores of various reported metrics such as percent of employees that recommend the firm or their ratings of compensation (1–5). Scores are all averaged over the 12-month period of the reviews analyzed.
Source: Glassdoor and AllianceBernstein (AB)

Other measures of wellness, such as physical safety and diversity, were less conclusive. Still, in information technology—the top-rated sector—employees had strong positive feelings about work-life balance, diversity and safety. In contrast, in the energy sector, where recommendations were lower, sentiment was weak in all three areas—despite the highest rating on compensation. In our view, these findings indicate that getting work-life balance right is a foundation for wellness, which can be boosted by promoting employee satisfaction in areas such as diversity and safety. But when wellness is not fostered, even higher pay will not command employee devotion.

Drilling down to individual companies can provide important insight on where a company stands on wellness versus peers. Using a proprietary database of hourly wages for 500 US companies across industries, we asked whether there is a correlation between firms that are paying living wages and those that receive high ratings from employees. In the consumer discretionary industry, for example, where satisfaction with compensation is relatively weak (as shown above), companies that paid higher wages tended to enjoy more employee recommendations (Display, left). Similarly, by plotting satisfaction with work-life balance and compensation, we can compare how companies are perceived versus rivals on key measures (Display, right). 

How Do Companies Compare to Peers on Wellness Measures?
S&P 500 Consumer Discretionary Companies

Past performance and current analysis do not guarantee future results.
Based on employee reviews posted on Glassdoor for S&P 500 companies in the consumer discretionary sector from May 2020 through April 2021. After scraping the reviews, we examined the raw text using natural language processing to derive themes such as work-life balance, diversity and safety. Our analysis also aggregated the scores of various reported metrics such as percent of employees that recommend the firm or their ratings of compensation (1–5). Scores are all averaged over the 12-month period of the reviews analyzed. 
Source: Glassdoor and AllianceBernstein (AB)

Investors can factor in this data as an input when developing an outlook on a company’s business, and whether employee dissatisfaction and turnover could be a threat. Employees may want to move to similar firms in the upper right of the plot, which offer better pay and better benefits. To combat this, firms should strive to improve their wellness in cost-effective ways. 

Big data analysis can help frame developing wellness trends in sectors, industries and individual companies. Of course, to interpret the results of this type of analysis, investors must factor in different industry conditions. For both employees and companies, the trade-offs between compensation and work-life balance are likely to be much different in high-paying technology or finance jobs versus low-paying jobs in industries such as retail or manufacturing. And evaluating individual companies requires fundamental research and informed engagement. By including wellness questions in a stock-selection process and engagement efforts, investors can gain insights into how companies are developing innovative approaches to creating a comfortable environment for workers to thrive. 

How Are Companies Evaluating Wellness?

As our big data analysis indicated, many companies are discovering that compensation is not the most important value for employees. For example, a major US pharmaceutical company held in one of our portfolios conducted a compensation analysis of its workforce and discovered that employee development and career path visibility and support outweighed increased compensation and benefits. For many of the company’s staff, work-life balance, development opportunities and childcare were ranked as important as pay-related issues.

Studies like this illuminate potential growth paths for employees. And they allow a company to conduct a more thoughtful assessment of the value added by each compensation dollar in comparison to money spent on efforts to increase retention and attraction. In turn, this can help companies reduce costly hires of external talent. 

Proactive wellness monitoring is taking root across sectors. At a major fintech firm, management conducts an annual compensation, benefit and wellness stress test. The goal is to determine whether employees are paid a thriving wage, working in optimal environments and receiving the support needed to promote a positive culture that maximizes staff retention. And at another giant consumer company, employee sentiment is measured every day. Taking the wellness pulse aims to identify trouble spots that deserve management’s attention. To be sure, companies must strike the right balance between monitoring wellness and making employees feel overly monitored, which would risk a backlash in employee sentiment.

Wellness assessment is becoming ingrained in the day-to-day operations of many companies. At one major US healthcare provider, an assessment tool is used to identify employees for leadership roles and development and to monitor work-life balance. The talent index draws on demographic, background and peer information to develop succession and mobility paths for key roles. And an employee engagement index helps measure staff sentiment in real time. The company reports that in its inaugural year, the information generated by these indices helped reduce turnover, increase productivity and cut human capital costs. While every company will have different methods of measuring wellness, tailored to the business and corporate culture, we believe investors should verify that portfolio companies are taking clear action to monitor staff sentiment.

Where does the responsibility for wellness begin and end? That’s a tricky question for large corporations with multinational supply chains. Is a supermarket responsible for the forced labor conditions that may be used in producing the cocoa for its chocolate bars?

One large US retail chain has risen to the challenge by educating its buyers, suppliers and transportation providers on best practices and audit procedures. The company is engaging with regulators, governments and local officials on effective legislation and enforcement. There is a clear business imperative for companies to keep tabs on its supply chain ecosystem, as it reduces the risks of business disruption from vigilant regulators or a disgruntled workforce.

Mental Health: The Unspoken Scourge

Within a company’s workforce, mental health is finally being talked about. Mental health issues are perhaps the most sensitive of all wellness issues, as they carry a stigma that deters employees from speaking up. According to the World Health Organization, only half of American workers are comfortable talking about mental health in the workplace, and more than a third are worried about job consequences if they seek mental health care.

That is a big challenge for companies. As the WHO reports, depression and anxiety costs $1 trillion a year globally in lost productivity. So companies have a clear incentive to address mental health issues. Yet how do you create an inclusive culture where people are comfortable seeking help—and taking time to recover—rather than resign?

For many employees around the world, growing pressure to stay connected to the workplace is adding acute pressure. In the work-from-home era, expectations of responding to emails around the clock have further blurred the boundaries between work and home.

In Australia, these trends have led labor unions to campaign for the “right to disconnect” from calls, texts and emails outside work hours. "If work invades all hours of your life and you cannot disconnect, it is a recipe for serious problems for both the worker and the employer," said Australian Council of Trade Unions secretary Sally McManus, in a report on ABC News in Australia. Being constantly connected presents a “high risk” of mental health problems, she said.


The growing frequency of mental health problems had been creating challenges for the insurance industry well before the pandemic. In 2017, Craig Drummond, the former CEO of Australian insurer Medibank, said private health insurers in the country fund 50% of all mental health admissions, and 90% of day admissions for mental health. Claims costs are growing with little upward movement in health insurance premiums, creating a serious challenge for insurers, he said.

CCLA, one of the largest UK charity fund managers, has put mental health at the center of efforts to assess how listed companies address employee wellbeing. “In the corporate world, stigma still exists,” says CCLA, “and whilst there are pockets of great practice within organizations, there is an absence of a serious structural attempt to treat corporate responsibility for mental health as seriously as physical health and safety.”

In an effort to promote awareness and action on mental health, the firm is developing the CCLA Mental Health Benchmark, which aims to show how listed companies are addressing employee well-being. Initiatives like this will make it easier for investors to evaluate wellness in holdings, while pressuring companies to demonstrate that they are creating an environment that is conducive to addressing mental health issues.

Striking the Right Balance

Balancing mental health, work-life balance and productivity will be key questions as the corporate world gradually returns to normal after the pandemic. Flexible working arrangements are likely to continue at many companies, but the debate is still raging. In the financial sector, some companies are pressing to get workers back in the office quickly, while others have said that they will provide staff much more flexible working arrangements post-pandemic.

Getting the wellness formula right will take time—and solutions will differ by the unique circumstances of industries and individual companies. But it’s not too soon for investors to start including wellness as an integral component in research, stock selection and engagement. Big data and quantitative tools must be creatively applied to gauge the efficacy of corporate wellness programs. Fundamental research should proactively incorporate an awareness of how investing in wellness can generate tangible competitive advantages. Armed with quantitative and qualitative insights, investors will be better equipped to ask management informed and candid questions about whether they are treating employees right to sharpen their business edge. 

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time. AllianceBernstein Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

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