Professor of Strategy and Entrepreneurship
London Business School

“Work-family initiatives”…?! We’re a company not a leisure park!

“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 such humbug.

Which tough, self-respecting corporation would want to be associated with that? Or should they… 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 of them, 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 (-.35%). However, that changed quite a bit into the 1990s. When in that period firms would declare a work-family initiative, stock price immediately jumped up, with on average .48%. Now that may seem peanuts to you, but if you’re a $5 billion company, it means that even one such initiative would already immediately increase the value of your firm with 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 which would be able to come up with a formula that enables people to have a real career without working 70 hours or even 5 days per week, should be able to turn that into a momentous competitive advantage in their industry (and 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 Michelle’s study suggests is that such firms are simply stuck in the 1980s; nowadays even the stock market recognises 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?

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