According to a new study from HR software provider SuccessFactors Inc., companies that make changes to performance ratings employees receive, as well as set goals for workers and line them up with larger strategies, are more likely to do better than their peers in the stock market.
 
The study by SuccessFactors found a 6 percent increase in industry-adjusted stock returns was associated with a 10 percent increase in the measurement of goal setting. The stock return boost was also accompanied by a 10 percent increase when it comes to evaluating workers and using the entire ratings scale. The study proves the importance of making sure employees know what is expected of them and providing them with honest opinions when it comes to feedback and evaluation time. 
 
According to the research, when good employees are given good marks and not-so-good employees are given lower marks—this helps companies be more effective and therefore have more success than their competitors in the stock market. 
 
The report included 153 publicly traded customers. It is part of increased research that shows the link between specific management practices and bottom line results. There seems to be more and more evidence of a connection between strong management and strong financial performance.
 
SuccessFactors is a vendor of talent management software. Last year, SuccessFactors published a report showing stock portfolios from its own customers performed better than major stock indices over a certain time period. This most recent study again shows its software is again linked to financial outperformance.
 
The report suggested a 10 percent increase in a measure of the degree a company uses its business execution suite was linked with a 4 percent increase in stock returns that are industry-adjusted. The report was conducted with the Wharton School of the University of Pennsylvania and Stanford University’s Graduate School of Business.
 
Modern Business Associates is an HR company that focuses on payroll and HR outsourcing. We routinely work with clients on talent management. As a Professional Payroll and HR outsource organization, our clients rely on us to help them effectively deal with these kinds of topics.