Does outperformance = A company driven to improve people’s lives?

A few weeks back, I read a blog article from the Ritz Carlton Leadership Center: “Companies with ideals of improving people’s lives at the center of all they do outperform others by 400%”. This claim comes on the back of a 10-year study conducted by brand consultant Millward Brown and Jim Stengel. One of the findings was that if a company touches on five fundamental human values that have a lasting impact on consumers, they are likely to provide a superior customer experience and in turn, their financial results should outperform those of their competitors.

The findings of the study compared 50 selected companies against the S&P 500 index and found that their returns over the 10-year period were 400% higher than the other 450 companies’ returns. Incidentally, the index was negative over the same period.

Like any study that deals with intangible variables, it is often hard to accurately quantify the unquantifiable. Unlike numbers from financial reports, which can convey exact measurements, key ‘values’ can be subjective and are therefore problematic to apply consistently. 

However, you don’t have to stray too far to see other points of evidence such as a Gallup study, which centres around workplace engagement of staff. Gallup regularly conducts research into employee engagement and their most recent poll found that over 31.5% of employees are engaged with their work. The rest are either “disengaged” or, as Gallup puts it, are “actively disengaged”.

I often wonder if all this sophisticated, fancy research was distilled, could we simply conclude that:

companies that drive meaningful change in people’s (their consumers’) lives

AND/OR companies with employees who are engaged with their work . . .

tend to outperform their peers. While this is not a given, it seems likely that companies which fulfil both elements potentially increase their chances of a positive, superior result.

Indeed, we find that from an investment perspective, organisations that have a clear purpose to drive a meaningful difference in people’s lives rather than just flog a product or service have historically outperformed their competitors to some degree.

So if you are considering your next investment option, make sure you consider supporting an organisation that is trying to make a meaningful difference, rather than one that is solely focused on the bottom line. Apart from helping you sleep easier at night, it might also help push up your returns a little!

Please also remember that before embarking on any investment decision, you should always seek professional guidance from a licensed financial planner. Of course, I recommend AJ Financial Planning.